IGCSE Economics
(Edexcel) Definitions
with correct answers
2025/2026
Economics - correct answersThe study of how society manages its scare resources to satisfy
unlimited wants
Economy - correct answersA system that attempt to solve the basic economic problem.
Micro-economics - correct answersThe study of how households (buyers) and firms (sellers)
make decisions regarding the allocation of limited resources and how they interact in specific
markets as individuals
,Macro-economics - correct answersThe branch of economics that examines the behaviour of
the whole economy
Scarcity - correct answersSociety has limited resources and therefore cannot produce enough
goods and services to satisfy everyone's wants.
Opportunity Cost - correct answersThe next best alternative forgone when an economic
decision is made
Wants - correct answersAnything you would like irrespective of whether you have the resources
to purchase it.
Needs - correct answersBasic requirements for human survival
Choice - correct answersThe selection of appropriate alternatives.
Ceteris Paribus - correct answers'other things being equal' It is used as a reminder that all
variables other than the one(s) being studied are assumed to be constant
Production Possibility Curve - correct answersThis shows maximum quantities of different
combinations of two products an economy can produce given current resources and the state of
technology.
Exporters - correct answersFirms that sell overseas.
Market - correct answersA place or situation where buyers and sellers communicate with
exchange in mind.
Market Failure - correct answersMarket failure occurs when freely functioning markets fail to
deliver an efficient allocation of resources. The result is a loss of economic and social welfare.
, Price - correct answersThe amount of money that goods are exchanged for a transaction.
Price Mechanism/Market System - correct answersThe automatic determination of prices and
the allocation of resources by the operation of markets in the economy.
Subsidy - correct answersA grant given to producers, usually to encourage production of a
certain good.
Demand - correct answersThe quantity of a product that consumers are willing and able to
purchase at various prices over a period of time.
Notional Demand - correct answersThe desire for a product.
Effective Demand - correct answersOnly when a consumers desire to buy a product is backed up
by an ability to pay for it does demand actually have an effect on the market.
Derived Demand - correct answersDemand that arises because there is demand for another
good.
Demand Curve - correct answersA line or curve drawn on a graph which shows how much of a
good will be bought at different prices.
Shift in the demand curve - correct answersA movement to the left or right of the entire
demand curve when there is a change in any factor affecting demand except price.
Supply - correct answersQuantities of a product that suppliers are willing and able to sell at
various prices per period of time, other things remaining the same.
Supply Curve - correct answersA line or curve drawn on a graph which shows how much of a
good sellers are willing to supply at different prices.
(Edexcel) Definitions
with correct answers
2025/2026
Economics - correct answersThe study of how society manages its scare resources to satisfy
unlimited wants
Economy - correct answersA system that attempt to solve the basic economic problem.
Micro-economics - correct answersThe study of how households (buyers) and firms (sellers)
make decisions regarding the allocation of limited resources and how they interact in specific
markets as individuals
,Macro-economics - correct answersThe branch of economics that examines the behaviour of
the whole economy
Scarcity - correct answersSociety has limited resources and therefore cannot produce enough
goods and services to satisfy everyone's wants.
Opportunity Cost - correct answersThe next best alternative forgone when an economic
decision is made
Wants - correct answersAnything you would like irrespective of whether you have the resources
to purchase it.
Needs - correct answersBasic requirements for human survival
Choice - correct answersThe selection of appropriate alternatives.
Ceteris Paribus - correct answers'other things being equal' It is used as a reminder that all
variables other than the one(s) being studied are assumed to be constant
Production Possibility Curve - correct answersThis shows maximum quantities of different
combinations of two products an economy can produce given current resources and the state of
technology.
Exporters - correct answersFirms that sell overseas.
Market - correct answersA place or situation where buyers and sellers communicate with
exchange in mind.
Market Failure - correct answersMarket failure occurs when freely functioning markets fail to
deliver an efficient allocation of resources. The result is a loss of economic and social welfare.
, Price - correct answersThe amount of money that goods are exchanged for a transaction.
Price Mechanism/Market System - correct answersThe automatic determination of prices and
the allocation of resources by the operation of markets in the economy.
Subsidy - correct answersA grant given to producers, usually to encourage production of a
certain good.
Demand - correct answersThe quantity of a product that consumers are willing and able to
purchase at various prices over a period of time.
Notional Demand - correct answersThe desire for a product.
Effective Demand - correct answersOnly when a consumers desire to buy a product is backed up
by an ability to pay for it does demand actually have an effect on the market.
Derived Demand - correct answersDemand that arises because there is demand for another
good.
Demand Curve - correct answersA line or curve drawn on a graph which shows how much of a
good will be bought at different prices.
Shift in the demand curve - correct answersA movement to the left or right of the entire
demand curve when there is a change in any factor affecting demand except price.
Supply - correct answersQuantities of a product that suppliers are willing and able to sell at
various prices per period of time, other things remaining the same.
Supply Curve - correct answersA line or curve drawn on a graph which shows how much of a
good sellers are willing to supply at different prices.
