Edexcel Economics A: Theme 1.2 Questions & Correct Answers/ Graded A+

Market : Where consumers and producers come into contact with each other to exchange goods and services Utility : The amount of satisfaction obtained from consuming a good or service Rational decision making : Where consumers allocate their expenditure on goods and services to maximize utility, and producers allocate their resources to maximize profits Demand : The quantity of a good or service purchased at a given price over a given period of time Demand curve : Shows the quantity of a good or service that would be bought over a range of different price levels in a given period of time 2 Marginal utility : The utility or satisfaction obtained from consuming one extra unit of a good or service Diminishing marginal utility : As successive units of a good are consumed , the utility gained from each extra unit will fall Price elasticity of demand : The responsiveness of demand for a good or service to a change in its price Income elasticity of demand : The responsiveness of demand for a good or service to a change in income Normal good : A good with a positive income elasticity of demand. As income rises, so too does demand for the good Cross elasticity of demand : The responsiveness of demand for good B to a change in price of good