IB Higher Level Economics
Terms
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- Microeconomics
- Microeconomics refers to the study of small discrete markets within the macroeconomy
- Macroeconomics
- Macroeconomics refers to the study of the economy as a whole.
- Economics
- Economics is a social science, which studies human behaviour and how scarce resources are allocated to satisfy unlimited wants.
- Economic Problem
- To satisfy unlimited wants with limited resources
- Positive economics
- Positive economics refers to the empirical study of economics that can be substantiated through fact.
- Ceteris Paribus
- All other things being equal
- Land
- Land refers to the gifts of nature eg soil, diamonds, timber
- Capital
- Capital refers to goods that can be used to produce other goods. An increase in the capital stock will increase the capacity of the economy to produce
- Labour
- The human factor, physical and mental contribution of the existing work force to production
- Enterprise/management
- The organization of the factors of production in order to produce goods and services
- Scarcity
- All resources are finite. Since wants are unlimited, resources are relatively scarce. All goods and services that have a price are scarce
- Normative economics
- Normative economics refers to the study of the economy using value judgements
- GDP
- Gross Domestic Product: the total market value of all final good and services produces within the borders of a country within a given period of time
- Economic growth
- The percentage change of the total market value of all final good and services produces within the borders of a country within a given period of time
- Recession
- Two successive quarters of negative economic growth
- Development
- An increase in living standards that implies increased per capita income, better education, access to health care, sanitation, nutrition as well as environmental protection
- Utility
- Satisfaction derived from consuming a good
- Opportunity cost
- The cost of the best alternative foregone
- Free goods
- 0 price, 0 production cost, 0 opportunity cost in consumption and production and freely abundant
- Economic goods
- Final goods that derive a price
- Normal good
- Good for which demand rises as income rises, ceteris paribus
- Inferior good
- Good for which demand falls as income rises, ceteris paribus
- Capital good
- Non-consumable goods that firms use to make other goods
- Giffen good
- A type of inferior good in that as income decreases quantity demanded increases however giffen goods are further characterized by when price increases, quantity demanded also increases, ceteris paribus
- Veblen good
- A status good - when price increases, the quantity demanded for the good also increases, ceteris paribus
- Production possibility curve
- The PPC shows all the combinations of two goods that can be produced if all resources are fully utilized in their best use
- Actual output
- Refers to that level of GDP the economy is currently operating in the short run, actual output may not necessarily occur at full employment
- Potential output
- The level of output that would arise if all resources were fully utilized in their best use. An economy has reached its potential output when it is operating on the frontier of its Production Possibility Curve
- Supply
- The willingness and the ability to produce goods and services at a particular price and time ceteris paribus
- Equilibrium
- Equilibrium occurs when there is no tendancy to change
- Substitute
- Two goods that have the same function eg butter and margarine
- Complement
- Two goods that are consumed together eg butter and bread
- Subsidy
- A payment per unit of production
- Direct Tax
- Refers to tax on income
- Indirect Tax
- A tax on goods
- Flat rate tax
- A regressive tax that is charged at a constant rate such as a parking ticket
- Ad valorem tax
- A indirect tax (a tax on goods) which will shift back the supply curve parallel from S to S1