IGCSE Economics Unit 3 -
Microeconomic Decision Makers with
Complete Solutions
Average Cost (AC) - ANSWER-The cost of producing a unit
Average Fixed Costs (AFC) - ANSWER-The fixed costs per unit
Average Variable Costs (AVC) - ANSWER-The variable costs per unit
Barriers to entry - ANSWER-Ways in which new firms are prevented from entering a
particular industry
Bartering - ANSWER-The act of swapping items in exchange for other items through a
process of bargaining and negotiation. E.g. someone might trade five sacks of rice for
one cow or four chickens for one sheep. Bartering is used in the absence of money.
Base rate (or bank rate) - ANSWER-The interest rate that a central bank will charge to
lend money to commercial banks and on which other financial organisations base their
interest rates
Basic Pay - ANSWER-The amount of money received before any additional payments
are added or any deductions, such as income tax, aare made
Borrowing - ANSWER-The act of taking out a loan with the requirement to pay the
money back over an agreed period of time, very often with interest
Capital intensive production - ANSWER-Where a high level of investment in capital is
required , such as in machinery, equipment and vehicles compared to other factors of
production
Central Bank - ANSWER-The bank of the Government which is responsible for
controlling a country's money supply, issuing notes and coins and setting the rules
commercial banks must follow
Collective Bargaining - ANSWER-A process of negotiation over pay and conditions
between a trade union representing a group of workers and employers
Commercial Bank - ANSWER-A financial institution in which individual firms can save
money and also obtain loans
Competition - ANSWER-Where different firms are trying to sell a similar product to a
customer
, Competitive market - ANSWER-Where a large number of firms compete with each other
to satisfy the want and needs of a large number of consumers
Conglomerate merger - ANSWER-Two firms with unrelated business activities join
together
Consumer Sovereignty - ANSWER-The power of consumers over how the market
allocates resources through determining what is produced and for whom
Derived Demand - ANSWER-When a product or factor of production is not demanded
for itself, but is dependent on the demand for the product it helps to produce
Direct Tax - ANSWER-A tax on income or wealth. E.g.income tax or corporation tax
Diseconomies of scale - ANSWER-Where an increase in the level of production results
in a rise in the average cost of production
Disposable Income - ANSWER-The income available to spend and save after direct
taxes have been deducted
Division of Labour - ANSWER-The process by which workers specialise in, or
concentrate on, one particular task
Earnings - ANSWER-The total amount received including additional payments
Economies of scale - ANSWER-Where an increase in the level of production results in a
fall in the average cost of production
Efficiency - ANSWER-How effective the firm is in using factors of production to generate
its output
Equal Opportunities - ANSWER-The policies and practices in employment that prevent
discrimination against someone on the grounds of race, age, gender, religion, disability
or any other characteristic unrelated to ability, performance and qualification
External economies - ANSWER-Arise from factors outside the control of a firm and
result in changes in the average cost of all firms in the industry regardless of size
Fixed Costs (FC) - ANSWER-Those costs which do not vary with output e.g. rent
Health and Safety - ANSWER-The laws and rules for identifying potential dangers and
health problems at work and, also, the ways of preventing these issues and keeping
people safe
Microeconomic Decision Makers with
Complete Solutions
Average Cost (AC) - ANSWER-The cost of producing a unit
Average Fixed Costs (AFC) - ANSWER-The fixed costs per unit
Average Variable Costs (AVC) - ANSWER-The variable costs per unit
Barriers to entry - ANSWER-Ways in which new firms are prevented from entering a
particular industry
Bartering - ANSWER-The act of swapping items in exchange for other items through a
process of bargaining and negotiation. E.g. someone might trade five sacks of rice for
one cow or four chickens for one sheep. Bartering is used in the absence of money.
Base rate (or bank rate) - ANSWER-The interest rate that a central bank will charge to
lend money to commercial banks and on which other financial organisations base their
interest rates
Basic Pay - ANSWER-The amount of money received before any additional payments
are added or any deductions, such as income tax, aare made
Borrowing - ANSWER-The act of taking out a loan with the requirement to pay the
money back over an agreed period of time, very often with interest
Capital intensive production - ANSWER-Where a high level of investment in capital is
required , such as in machinery, equipment and vehicles compared to other factors of
production
Central Bank - ANSWER-The bank of the Government which is responsible for
controlling a country's money supply, issuing notes and coins and setting the rules
commercial banks must follow
Collective Bargaining - ANSWER-A process of negotiation over pay and conditions
between a trade union representing a group of workers and employers
Commercial Bank - ANSWER-A financial institution in which individual firms can save
money and also obtain loans
Competition - ANSWER-Where different firms are trying to sell a similar product to a
customer
, Competitive market - ANSWER-Where a large number of firms compete with each other
to satisfy the want and needs of a large number of consumers
Conglomerate merger - ANSWER-Two firms with unrelated business activities join
together
Consumer Sovereignty - ANSWER-The power of consumers over how the market
allocates resources through determining what is produced and for whom
Derived Demand - ANSWER-When a product or factor of production is not demanded
for itself, but is dependent on the demand for the product it helps to produce
Direct Tax - ANSWER-A tax on income or wealth. E.g.income tax or corporation tax
Diseconomies of scale - ANSWER-Where an increase in the level of production results
in a rise in the average cost of production
Disposable Income - ANSWER-The income available to spend and save after direct
taxes have been deducted
Division of Labour - ANSWER-The process by which workers specialise in, or
concentrate on, one particular task
Earnings - ANSWER-The total amount received including additional payments
Economies of scale - ANSWER-Where an increase in the level of production results in a
fall in the average cost of production
Efficiency - ANSWER-How effective the firm is in using factors of production to generate
its output
Equal Opportunities - ANSWER-The policies and practices in employment that prevent
discrimination against someone on the grounds of race, age, gender, religion, disability
or any other characteristic unrelated to ability, performance and qualification
External economies - ANSWER-Arise from factors outside the control of a firm and
result in changes in the average cost of all firms in the industry regardless of size
Fixed Costs (FC) - ANSWER-Those costs which do not vary with output e.g. rent
Health and Safety - ANSWER-The laws and rules for identifying potential dangers and
health problems at work and, also, the ways of preventing these issues and keeping
people safe
