Theme 1 and 2 Edexcel A-Level Economics Glossary
Theme 1
- Need- something you must have to survive
- Want- an item that we desire but is not essential to survival
- Basic Economics Problem- there are wants and finite resources. The govt
needs to decide
1. Who
2. How
3. What
- Factors of Production-
1. Land- natural physical resources
2. Labour- human capital
3. Capital- manufactured resources which help create consumer goods
4. Enterprise- ability and willingness to start a business
- Rewards to Factors of Production
1. Land = rent
2. Labour = wages
3. Capital = interest
4. Enterprise = profit
- Opportunity cost- cost of the next best alternative foregone when
deciding
- Positive Statement- objective claim that can be evaluated or rejected by
referring to empirical evidence
- Normative Statement- express an opinion about what ought to be or
what should be. They are subjective statements
- Value judgement- a view of the rightness or wrongness of something,
based on a personal view
- Capital goods- are not useful in themselves but can help produce goods
and services
- Scarcity- Scarce means limited. There is only a limited number of
resources available to produce the unlimited amount of goods and
services we desire
- Production Possibility Frontier/Curve- shows the combinations of two or
more goods and services that can be produced using all available factor
resources efficiently.
- Division of labour- when the production process is multiplied into
different task, and each employee is designated one task
, - Medium of exchange- Money is any asset that is widely acceptable as a
medium of exchange when buying goods and services in markets. It
facilitates transactions between buyer and seller.
- Specialisation- A method of production where a business or area focuses
on the production of a limited scope of products or services to gain
greater productive efficiency
- Store of value- a function in money that it can be used to save and
exchange at a later time
- Unit of account- a nominal unit of measure of currency used to value
products
- Command economy- An economic system in which the government
controls a country's economy. Resources are allocated by the
government.
- Free Market -system of buying and selling that is not under the control
of the government and where people can buy and sell freely
- Mixed economy- where resources are partly allocated by the market ad
partly by the government
- Incentives- things that attract or lure people into action
- Utility- Measure of the satisfaction that we gain from purchasing and
consuming a good or a service
- Demand- Quantity of a good or a service that consumers are willing and
able to buy at a given price level in a given period of time
- Diminishing marginal utility- Beyond a certain point, marginal utility may
start to fall (diminish). If marginal utility becomes negative, then
consuming an extra unit will cause total Utility to fall.
- Marginal utility- Marginal utility is the change in satisfaction from
consuming an extra unit of a good or service
- Law of Demand- there is an inverse relationship between price and
quantity/
- Excess demand- the difference between the quantity supplied and the
higher quantity demanded when the price is set below the equilibrium
price.
- Complements in production said to be joint in demand, you will need
one in order to use the other
- Cross elasticity of Demand- Responsiveness of demand for good X
following a change in the price of good Y (a related good)
- Income elasticity of demand- measures the responsiveness of a change
in quantity demanded to a change in income
- Inferior good- when income increases, demand for the product
decreases. Have a negative YED.
Theme 1
- Need- something you must have to survive
- Want- an item that we desire but is not essential to survival
- Basic Economics Problem- there are wants and finite resources. The govt
needs to decide
1. Who
2. How
3. What
- Factors of Production-
1. Land- natural physical resources
2. Labour- human capital
3. Capital- manufactured resources which help create consumer goods
4. Enterprise- ability and willingness to start a business
- Rewards to Factors of Production
1. Land = rent
2. Labour = wages
3. Capital = interest
4. Enterprise = profit
- Opportunity cost- cost of the next best alternative foregone when
deciding
- Positive Statement- objective claim that can be evaluated or rejected by
referring to empirical evidence
- Normative Statement- express an opinion about what ought to be or
what should be. They are subjective statements
- Value judgement- a view of the rightness or wrongness of something,
based on a personal view
- Capital goods- are not useful in themselves but can help produce goods
and services
- Scarcity- Scarce means limited. There is only a limited number of
resources available to produce the unlimited amount of goods and
services we desire
- Production Possibility Frontier/Curve- shows the combinations of two or
more goods and services that can be produced using all available factor
resources efficiently.
- Division of labour- when the production process is multiplied into
different task, and each employee is designated one task
, - Medium of exchange- Money is any asset that is widely acceptable as a
medium of exchange when buying goods and services in markets. It
facilitates transactions between buyer and seller.
- Specialisation- A method of production where a business or area focuses
on the production of a limited scope of products or services to gain
greater productive efficiency
- Store of value- a function in money that it can be used to save and
exchange at a later time
- Unit of account- a nominal unit of measure of currency used to value
products
- Command economy- An economic system in which the government
controls a country's economy. Resources are allocated by the
government.
- Free Market -system of buying and selling that is not under the control
of the government and where people can buy and sell freely
- Mixed economy- where resources are partly allocated by the market ad
partly by the government
- Incentives- things that attract or lure people into action
- Utility- Measure of the satisfaction that we gain from purchasing and
consuming a good or a service
- Demand- Quantity of a good or a service that consumers are willing and
able to buy at a given price level in a given period of time
- Diminishing marginal utility- Beyond a certain point, marginal utility may
start to fall (diminish). If marginal utility becomes negative, then
consuming an extra unit will cause total Utility to fall.
- Marginal utility- Marginal utility is the change in satisfaction from
consuming an extra unit of a good or service
- Law of Demand- there is an inverse relationship between price and
quantity/
- Excess demand- the difference between the quantity supplied and the
higher quantity demanded when the price is set below the equilibrium
price.
- Complements in production said to be joint in demand, you will need
one in order to use the other
- Cross elasticity of Demand- Responsiveness of demand for good X
following a change in the price of good Y (a related good)
- Income elasticity of demand- measures the responsiveness of a change
in quantity demanded to a change in income
- Inferior good- when income increases, demand for the product
decreases. Have a negative YED.
