The list of useful glossaries for Unit 1: Competitive Markets: How They Work and Why They Fail:
1. Production possibility frontier/ curve: A curve that shows the maximum combination of two goods that can be produced in an economy if all resources are fully and efficiently utilised
2. Opportunity cost: the next best alternative foregone
3. Economic growth: when there is an outward shift of PPF
4. Specialisation/ division of labour: when a task is broken into many small repetitive parts each done by a small group of people or individuals
5. Labour productivity: output per worker
6. Capital productivity: output per capital/ machine employed
7. Positive statement: a statement that can be testified/ verified true or false by referring to available evidence/ a statement that its truth cannot be argued
8. Normative statement: a statement that contains subjective/ value judgement that cannot be testified/ a statement that is arguable
9. Command/ centrally planned economy: an economic system where government, through a planning process will allocate resources in society
10. Free market/ market/ free enterprise/ capitalist economy: an economic system which resolves the basic economic problem through the market mechanism/ demand and supply
11. Mixed economy: an economic system where both the free market mechanism and government planning process work together to allocate economic resources/ an economic system which has elements of both capitalism and socialism
12. Price mechanism: the interaction of demand and supply to resolve the issue of scarcity and infinite wants
13. Consumer surplus: the difference between what consumers are willing and able to pay and what they are actually paying at market price
14. Producer surplus: difference between the market price and the lowest price firms are willing and able to sell at
15.PED (Price elasticity of demand): measurement of the responsiveness of quantity demanded for a good to a change in price
16. Inelastic demand: when a change in price leads to less than proportionate change in quantity demanded
17. Elastic demand: when a change in price leads to greater than proportionate change in quantity demanded
18. XED (Cross elasticity of demand): measurement of the responsiveness of demand for a good to a change in the price of another good
19. Complement goods: a good that is used in conjunction with another good
20. Substitute goods: goods that can be used in place of another
21. YED (Income elasticity of demand): measurement of the responsiveness of demand for a good to a change in income
22. Normal goods: goods where people will demand more when there is an increase in income
23. Inferior goods: goods where people will demand less when there is an increase in income
24. PES (Price elasticity of supply): measurement of the responsiveness of quantity supplied for a good to a change in price
25. Subsidy: a grant that is given by government to reduce the production cost of a good
26. Indirect tax: a charge that is levied by the government upon the consumption of a good
27. VAT (Value Added Tax): a tax/ charge that is levied at each stage of production process and at final sale
28. Specific/ unit tax: tax that is levied on volume
29. Ad-valorem tax: tax that is levied as a percentage of the value of the good
30. Incidence of tax: upon who the burden of taxation falls onto
31. Market failure: when the interaction of demand and supply leads to inefficient allocation of resources
32. Government failure: when government intervention to resolve economic problems leads to net welfare loss
33. NMW (National Minimum Wage): a minimum wage that employers are obliged to pay, below which is illegal for them to hire workers
34. MGP (Minimum Guaranteed Price): A scheme set up by the EU government to increase the income of farmers
35. Buffer stock scheme: a scheme whereby the related organisation intervenes in the open market by buying up and selling the product so as to maintain price within a targeted range
36. Public goods: goods that have the characteristics of non-rivalry and non-excludability
37. Free rider: people who get to benefit from the consumption of a good or service when it is someone else that actually pays for it
38. Merit goods: goods and services that are beneficial for the entire society but will be under-provided and hence under-consumed if left to the market force
39. Demerit goods: goods and services that are perceived as harmful for the entire society but will be over-provided and hence over-consumed if left to the m
40. Private benefits: benefits that are directly gained by individuals or firms when they engage in an economic activity
41. External benefits/ positive externalities: benefits accrued by a third party which is not directly part of an economic activity/ positive spillover effect/ when social benefits are greater than private benefits
42. Private costs: costs that are directly incurred by individuals or firms when they engage in an economic activity
43. External costs/ negative externalities: costs accrued by a third party which is not directly part of an economic activity/ negative spillover effect/ when social costs are greater than private costs
44. Tradable pollution permits: permits to pollute that can be bought and sold in an open market which is introduced to limit emissions
45. Property rights: rights to ownership of an asset such as land
46. Occupational immobility of labour: a situation where workers find it difficult to move from one job to another due to mismatch of skills
47. Geographical immobility: a situation where workers find it difficult to move from one place to another in search for jobs
48. Asymmetric information: when one party is better informed than the other
49. Competitive demand: when two or more goods are substitutes for one another
50. Composite demand: when a good is demanded for two or more uses (e.g. milk for yoghurt, cheese making, butter or drinking)
51. Derived demand: when the demand for one good is the result of rise in demand for another good (e.g. lecturers and GCE Edexcel A-Levels)
52. Joint demand: when two or more goods are needed simultaneously to allow an economic activity to take place
53. Joint supply: an economic process that can yield two or more different outputs at the same time
54. Excess demand/ shortage: when quantity demanded is greater than quantity supplied
55. Excess supply/ surplus: when quantity supplied is greater than quantity demanded
56. Demand: the quantity of goods purchased at any given price holding other factors constant
57. Supply: the quantity of goods supplied at any given price, holding other factors constant
58. Ceteris paribus: is an assumption that other variables/ factors are constant whilst one change is being considered
59. Capital goods/ fixed capital: economic resources such as factories, hospitals, offices and machines which are used to produce goods and services
60. Human capital: the set of skills which an employee acquires on the job through training and experience which will increase the employee’s value in market place
61. Factors of production: inputs to the production process such as land, labour, capital and entrepreneurs
62. Scarcity: an economic problem that arises because people have unlimited wants but resources are limited
63. Needs: the minimum which is necessary for a person to survive as a human being
64. Wants: desires for the consumption of a good or service
65. Economic goods: Goods which are scarce because their use has an opportunity cost
66. Free goods: Goods which are unlimited in supply and which therefore has no opportunity cost
Additional guide:
1. Definitions in bold italic are the 'more important' ones and they are highly likely to be tested both in Section A MCQ and Section B Data Response. When I say that, I don't mean that the rests are unimportant. They can be equally very useful when it comes to writing or explanation. Bear in mind that examiners love to see how economic terminologies are spiced up with real life examples particularly for questions that contain *
2. Please read/ study the definitions with logic. Try to understand and reason them. Ask yourself some questions along the way. Avoid rot-memorising. Trust me. You will not retain what you had studied. Probably the best, several hours to a day. Then, the whole painful process will have to start all over again
3. I will provide the list of Unit 2 and Unit 3 glossaries very very soon. In total, there will be probably another 120-130 terms
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