,The Law of Demand - CORRECT ANSWERS-consumers will buy more of a good when
its price is lower and less when its price is higher
The Law of Supply - CORRECT ANSWERS-producers offer more of a good as its price
increases and less as its price falls
Equilibrium Price - CORRECT ANSWERS-the price at which the quantity demanded
equals the quantity supplied
Excess Supply - CORRECT ANSWERS-the amount by which quantity supplied
exceeds quantity demanded when the price of a good exceeds the equilibrium price
Surplus - CORRECT ANSWERS-A situation in which quantity supplied is greater than
quantity demanded
Excess Demand - CORRECT ANSWERS-The situation that exists when demand is
greater than supply.
Deficit - CORRECT ANSWERS-A situation in which quantity supplied is less than the
quantity demanded
Economics - CORRECT ANSWERS-A social science that studies how people seek to
satisfy their needs and wants by making choices
Price Elasticity of Demand - CORRECT ANSWERS-a measure of how much the
quantity demanded of a good responds to a change in the price of that good.
Income Elasticity of Demand - CORRECT ANSWERS-a measure of the responsiveness
of the quantity demanded to changes in income.
Cross Price Elasticity of Demand - CORRECT ANSWERS-measures the response of
demand for one good to changes in the price of another good
PED Formula - CORRECT ANSWERS-% change in quantity demanded / % change in
price
YED Formula - CORRECT ANSWERS-% change in quantity demanded / % change in
income
XED Formula - CORRECT ANSWERS-% change in quantity demanded of good X / %
change in price of good Y
Luxury Good - CORRECT ANSWERS-a good with an income elasticity greater than 1
for which demand rises by a greater amount than the rise in income.
, Normal Good - CORRECT ANSWERS-a good for which the demand increases as
income rises and decreases as income falls
Veblen Good - CORRECT ANSWERS-A good with a positively sloped demand curve.
As price increases people buy more of these goods to demonstrate their social status.
Inferior Good - CORRECT ANSWERS-a good for which, other things being equal, an
increase in income leads to a decrease in demand
Substitute Good - CORRECT ANSWERS-A good that can be used in place of another
good
Complementary Good - CORRECT ANSWERS-Products and services that are used
together. When the price of one falls, the demand for the other increases (and
conversely).
Positive Economic Statement - CORRECT ANSWERS-A statement that can be proved
or disproved by reference to facts
Normative Economic Statement - CORRECT ANSWERS-A statement that reflects on
opinion, which cannot be proved or disproved by reference to the facts.
Production Possibilities Frontier (PPF) - CORRECT ANSWERS-a diagram that shows
the productively efficient combinations of two products that an economy can produce
given the resources it has available
Opportunity Cost - CORRECT ANSWERS-The cost of the next best alternative forgone.
Scarcity - CORRECT ANSWERS-A situation in which unlimited wants exceed the
limited resources available to fulfill those wants
The Basic Economic Problem - CORRECT ANSWERS-Resources have to be allocated
between competing uses because wants are infinite whilst resources are scarce
Value Judgement - CORRECT ANSWERS-An opinion based on a person's individual
values and beliefs
Productive Efficiency - CORRECT ANSWERS-Goods are being produced at lowest
possible cost. To be productively efficient means the economy must be producing on its
production possibility frontier.
Allocative Efficiency - CORRECT ANSWERS-When the mix of goods being produced
represents the mix that society most desires. A more precise definition of is at an output
level where the price equals the Marginal Cost (MC) of production. This is because the
price that consumers are willing to pay is equivalent to the marginal utility that they get
its price is lower and less when its price is higher
The Law of Supply - CORRECT ANSWERS-producers offer more of a good as its price
increases and less as its price falls
Equilibrium Price - CORRECT ANSWERS-the price at which the quantity demanded
equals the quantity supplied
Excess Supply - CORRECT ANSWERS-the amount by which quantity supplied
exceeds quantity demanded when the price of a good exceeds the equilibrium price
Surplus - CORRECT ANSWERS-A situation in which quantity supplied is greater than
quantity demanded
Excess Demand - CORRECT ANSWERS-The situation that exists when demand is
greater than supply.
Deficit - CORRECT ANSWERS-A situation in which quantity supplied is less than the
quantity demanded
Economics - CORRECT ANSWERS-A social science that studies how people seek to
satisfy their needs and wants by making choices
Price Elasticity of Demand - CORRECT ANSWERS-a measure of how much the
quantity demanded of a good responds to a change in the price of that good.
Income Elasticity of Demand - CORRECT ANSWERS-a measure of the responsiveness
of the quantity demanded to changes in income.
Cross Price Elasticity of Demand - CORRECT ANSWERS-measures the response of
demand for one good to changes in the price of another good
PED Formula - CORRECT ANSWERS-% change in quantity demanded / % change in
price
YED Formula - CORRECT ANSWERS-% change in quantity demanded / % change in
income
XED Formula - CORRECT ANSWERS-% change in quantity demanded of good X / %
change in price of good Y
Luxury Good - CORRECT ANSWERS-a good with an income elasticity greater than 1
for which demand rises by a greater amount than the rise in income.
, Normal Good - CORRECT ANSWERS-a good for which the demand increases as
income rises and decreases as income falls
Veblen Good - CORRECT ANSWERS-A good with a positively sloped demand curve.
As price increases people buy more of these goods to demonstrate their social status.
Inferior Good - CORRECT ANSWERS-a good for which, other things being equal, an
increase in income leads to a decrease in demand
Substitute Good - CORRECT ANSWERS-A good that can be used in place of another
good
Complementary Good - CORRECT ANSWERS-Products and services that are used
together. When the price of one falls, the demand for the other increases (and
conversely).
Positive Economic Statement - CORRECT ANSWERS-A statement that can be proved
or disproved by reference to facts
Normative Economic Statement - CORRECT ANSWERS-A statement that reflects on
opinion, which cannot be proved or disproved by reference to the facts.
Production Possibilities Frontier (PPF) - CORRECT ANSWERS-a diagram that shows
the productively efficient combinations of two products that an economy can produce
given the resources it has available
Opportunity Cost - CORRECT ANSWERS-The cost of the next best alternative forgone.
Scarcity - CORRECT ANSWERS-A situation in which unlimited wants exceed the
limited resources available to fulfill those wants
The Basic Economic Problem - CORRECT ANSWERS-Resources have to be allocated
between competing uses because wants are infinite whilst resources are scarce
Value Judgement - CORRECT ANSWERS-An opinion based on a person's individual
values and beliefs
Productive Efficiency - CORRECT ANSWERS-Goods are being produced at lowest
possible cost. To be productively efficient means the economy must be producing on its
production possibility frontier.
Allocative Efficiency - CORRECT ANSWERS-When the mix of goods being produced
represents the mix that society most desires. A more precise definition of is at an output
level where the price equals the Marginal Cost (MC) of production. This is because the
price that consumers are willing to pay is equivalent to the marginal utility that they get
