Economics - Supply and Demand Definitions

Limited resources + Unlimited wants = scarcity

The next best alternative forgone when an economic decision is made

Something that is available without a limit, e.g. Air

Shows the maximum combination of goods & services that can be produced by an economy in a given time

land, labor, capital, entrepreneurship

Everything that grows on the land or is found under it (includes all natural resources)

Human Factor (physical and mental contribution of the workforce to production)

Stock of manufactured resources that is used to produce goods & services

Organising & Risktaking factor of production

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

Growth that stays within the production possibility curve / Increase in Real GDP

An increase in the productive capacity of the economy

Decisions are made by the government, all resources are collectively owned

Prices are used to ration goods and services, all productions is in private hands and demand & supply set wages & prices in the economy

A mix between planned (command) economy and free market economy

May be proven right or wrong by looking at the facts

Matter of opinion and cannot be proven right or wrong

a denial of the validity of an opposing argument / a research study to determine if the findings can be applied to other data/methods

Capital or Income that escapes an Economy (Taxes, Savings, Imports)

Introduction of income into an economy (Government expenditure, Exports, Investment)

The production of goods and services that will be used to produce other goods

Monetary Value of final goods and services produced in an economy in a given period of time

A charge levied by the government on an individual, household or institution (e.g. income tax, NI, council tax, etc.)

A charge levied by the government on spending on goods and services (e.g. VAT, excise duties)

A fixed amount of tax per unit (e.g. excise duty on alcohol = GBP 2.23 per 750ml

A percentage tax is added onto the price of the good (e.g. VAT in UK = 20%)

The government pays for firms to produce a good/service

the difference between the highest price a consumer is willing to pay and the actual price they pay

the difference between what producers are willing to sell at and what price they actually receive

Responsiveness of quantity supplied to a change in price

Responsiveness of quantity demanded to a change in price

Responsiveness of quantity demanded to a change in income

Price x Quantity

A certain price at below which it is illegal to sell a good for (e.g. minimum wage)

A certain price above which it is illegal to sell a good for (e.g. rent controls)