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IB economics HL Definitions

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Scarcity
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A situation where unlimited wants exist but the resources available to meet them are limited
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Resource allocation
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The way that resources within an economy are split between their various uses
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Land
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Physical factor of produc
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Labour
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Human factor of production Physical and mental contribution of existing workforce
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Capital
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Factor of production that is made by humans.Occurs as a result of investment
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Entrepreneurship
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Factor of production involving Organisation of other factors of production
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Utility
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Benefits of satisfaction gained from consuming goods and services
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Opportunity cost
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Cost measured in terms of the next best alternative forgone
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Free good
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Commodities that have no price and no opportunity cost
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Public Sector
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The part of the economy where goods and services are provided
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Sustainable Development
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Development that meets the needs of the present without compromising the ability of future generations to meet their needs
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Economic Growth
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The increase in a country’s output over time
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Economic Development
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The sustainable improvement in living standards that implies increased per capita income ,better education and health, as well as environmental protection.
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Monopoly
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Where there is only one dominant firm in the industry.
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Demand
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The quantity which buyers are willing to purchase of a particular good or service at a given price over a given period of time
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Normal goods
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Goods where demand increase as income increases
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Inferior goods
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Goods where demand falls as income increases
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Complementary goods
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Goods where the change in price of one will inversely effect demand and price of the other
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Substitutes
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Goods with in competition with positive cross elasticity of demand
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Giffen Good
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An inferior good whose demand increases as price increases
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Veblen Good
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A luxury good whose demand increases as price increases
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Supply
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The quantity which sellers are willing to sell a particular good or service at a given price at a given point in time.
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Equilibrium Price
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The price at which quantity demanded equals quantity supplied
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Allocative Efficiency
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The efficiency at which markets are allocating resources
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Consumer surplus
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When consumers are able to buy a good for less that they are willing to pay
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Producer surplus
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the difference between what price a producer would accept for a good and what he actually accepts
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Price elasticity of demand
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The responsiveness of the quantity demanded to a change in price
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Price elasticity of supply
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The responsiveness of a quantity supplied to a change in price
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Cross price elasticity of demand
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The responsiveness of a demand in one good to a change in price of another
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Income elasticity of demand
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The responsiveness of demand to a change in consumer incomes
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Subsidy
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Financial assistance given to firms by governments to decease price and increase production
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Direct tax
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A tax directly upon income
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Indirect tax
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An expenditure tax on goods and services
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Specific tax
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When a specific tax is imposed on a good
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Ad Valoren tax
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Is a tax expressed as a percentage
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Price Ceiling
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A price imposed on a good below the equilibrium price
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Price floor
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A price imposed on a good above the equilibrium price
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Parallel market
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A market where no tax is paid and regulation can be avoided
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Market Failure
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When a market fails to produce efficient outcome
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Externalities
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Costs of benefits of economic activities which are met by others rather than the party which causes them
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public goods
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Goods and services that everyone can consume at the same time and are non rivalrous and non excludable
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Merit Good
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A good with positive externalities
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Demerit good
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A good with negative externalities
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Free riders
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Those who benefit from a good or service without paying
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Assymetric information
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Where one party of a transaction has access to relevant information that another does not
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Fixed Factor
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An input that cannot be increased in supply in the short run
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Variable factors
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An input that can be increased in supply in the short run
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Productivity
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the amount of output per unit of inpu
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Short run
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the period of time when atleast one factor is fixed
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Marginal Cost
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The cost of producing one more unit of output
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Long Run
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The period of time long enough for all factors to be variable
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Economies of scale
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When increasing the scale of production leads to a lower cost per unit of output
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Price taker
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A firm that is to small to influence the market price
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Cartel
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A formal collusive agreement between a small number of firms
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Deadweight loss
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xxx
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GDP
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The total market value of all Final goods and services produced in a country over a given period of time
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GNP
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The sum total of all final goods and services produced by a country in a given period of time, plus the value of net property from abroad
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Depreciation
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The wearing out of capital goods
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Factor prices
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The cost of all of factors of production, before the adjustment for tax and subsidies
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Real
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Adjusted for inflation
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Absolute poverty
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Where income falls below that required for minimum consumption
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Aggregate demand
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Total sum of all goods and services produced in an economy over a given period of time
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Investment
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The purchase of capital goods
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Aggregate supply
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The total supply or availability of goods and services in the economy
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Demand Side policies
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Government policy that attempts to alter the level of AD
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Fiscal Policy
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Policy regarding the size and composition of government spending and revenue.
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Expansionary fiscal policy
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Increasing government expenditure, will increase AD
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Monetary policy
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the central bank policy regarding the quantity of money in the economy, the rate of interest and exchange rate.
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Supply Side policies
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Government economic policies that change aggregate supply in order in order to stabilise economy
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Crowding out
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A situation where government spending displaces private spending
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Unemployment
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Those of working age who are without work , but who are available for work at the current wage rates
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Structural unemployment
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unemployment caused by a change in the demand for skills as the nature of the economy changes
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Inflation
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Inflation is the sustained upward movement in the average level of prices
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Consumer Price index
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measures the change in purchasing a fixed basket of goods and services from one time period to another