IGCSE Economics Paper 1 Definitions
with Complete Solutions
Advantages of a monopoly - ANSWER-economies of scale, can be efficient and lower
prices, better able to afford R&D
Average costs - ANSWER-total costs/ output
Average product - ANSWER-=total product/units of labour
Average revenue - ANSWER-total revenue / output.
Capital goods - ANSWER-Man made resources produced by labour which can help in
the production of other goods and services.
Ceteris Parabis - ANSWER-Means all other things being equal and is used to examine
determinants in isolation
Characteristics of a perfect competitive market - ANSWER-Homogeneous product
(same goods), price takers (cannot influence price b/c competition), perfect information,
freedom of entry and exit.
Complements - ANSWER-goods that come together, are jointly demanded.
Consumer Goods - ANSWER-products bought by consumers to satisfy their wants
Contraction of demand - ANSWER-refers to the quantity demanded for a product to fall
as price rises.
Corporation - ANSWER-owned by shareholder, limited liability
Cross elasticity of demand - ANSWER-change in the price of one good affects the
demand of another good.
Demand - ANSWER-is the willingness and ability of consumers to buy goods and
services.
Determinants of Supply - ANSWER-Weather, technical progress, changes in costs of
factors of production, changes in prices of other commodities
Disadvantages of a monopoly - ANSWER-increased prices, no choice in product, no
incentive to innovate
, Diseconomies of scale - ANSWER-occur when the average cost of producing a
good/service increases from a firm being inefficient.
Disequilibrium - ANSWER-(Quantity demanded does not equal Quantity supplied) at a
given price level
Division of Labour - ANSWER-when a workforce is separated for each to do a specific
task in producing a good or service.
Economic system - ANSWER-Used to answer a countries three economics questions,
what, how, and for whom
Economies of scale - ANSWER-the average cost of producing a good/service
decreases as output increases
Economy - ANSWER-Where people produce goods and services.
Entrepreneur - ANSWER-person who combines the factors of production and takes the
risk in the company
Equation for Price elasticity of Demand - ANSWER-Change in quantity demanded/ %
Change in price.
Equilibrium price - ANSWER-The equilibrium price is the market price where the
quantity demanded of a good is satisfied with the quantity supplied
Excess demand - ANSWER-refers to the quantity demanded being higher than the
quantity supplied
Excess supply - ANSWER-refers to the quantity supplied being higher than the quantity
demanded
Extension of demand - ANSWER-refers to an increase in quantity demanded with a fall
in price
Factors of demand - ANSWER-Weather, Changes in people's income, Changes in
population, Changes in the prices of other goods, changes in fashion/popularity
Financial Economies of scale: - ANSWER-Allow firms to take huge loans and sell
shares on stock exchange.
Fixed costs - ANSWER-costs that do not change as output changes
Horizontal Integration - ANSWER-two firms in the same stage of industry join together.
Imperfect market - ANSWER-a powerful consumer or producer can influence prices
with Complete Solutions
Advantages of a monopoly - ANSWER-economies of scale, can be efficient and lower
prices, better able to afford R&D
Average costs - ANSWER-total costs/ output
Average product - ANSWER-=total product/units of labour
Average revenue - ANSWER-total revenue / output.
Capital goods - ANSWER-Man made resources produced by labour which can help in
the production of other goods and services.
Ceteris Parabis - ANSWER-Means all other things being equal and is used to examine
determinants in isolation
Characteristics of a perfect competitive market - ANSWER-Homogeneous product
(same goods), price takers (cannot influence price b/c competition), perfect information,
freedom of entry and exit.
Complements - ANSWER-goods that come together, are jointly demanded.
Consumer Goods - ANSWER-products bought by consumers to satisfy their wants
Contraction of demand - ANSWER-refers to the quantity demanded for a product to fall
as price rises.
Corporation - ANSWER-owned by shareholder, limited liability
Cross elasticity of demand - ANSWER-change in the price of one good affects the
demand of another good.
Demand - ANSWER-is the willingness and ability of consumers to buy goods and
services.
Determinants of Supply - ANSWER-Weather, technical progress, changes in costs of
factors of production, changes in prices of other commodities
Disadvantages of a monopoly - ANSWER-increased prices, no choice in product, no
incentive to innovate
, Diseconomies of scale - ANSWER-occur when the average cost of producing a
good/service increases from a firm being inefficient.
Disequilibrium - ANSWER-(Quantity demanded does not equal Quantity supplied) at a
given price level
Division of Labour - ANSWER-when a workforce is separated for each to do a specific
task in producing a good or service.
Economic system - ANSWER-Used to answer a countries three economics questions,
what, how, and for whom
Economies of scale - ANSWER-the average cost of producing a good/service
decreases as output increases
Economy - ANSWER-Where people produce goods and services.
Entrepreneur - ANSWER-person who combines the factors of production and takes the
risk in the company
Equation for Price elasticity of Demand - ANSWER-Change in quantity demanded/ %
Change in price.
Equilibrium price - ANSWER-The equilibrium price is the market price where the
quantity demanded of a good is satisfied with the quantity supplied
Excess demand - ANSWER-refers to the quantity demanded being higher than the
quantity supplied
Excess supply - ANSWER-refers to the quantity supplied being higher than the quantity
demanded
Extension of demand - ANSWER-refers to an increase in quantity demanded with a fall
in price
Factors of demand - ANSWER-Weather, Changes in people's income, Changes in
population, Changes in the prices of other goods, changes in fashion/popularity
Financial Economies of scale: - ANSWER-Allow firms to take huge loans and sell
shares on stock exchange.
Fixed costs - ANSWER-costs that do not change as output changes
Horizontal Integration - ANSWER-two firms in the same stage of industry join together.
Imperfect market - ANSWER-a powerful consumer or producer can influence prices
