IGCSE Economics (Edexcel) Definitions

Economics - correct answer The study of how society manages its scare resources to satisfy unlimited wants Economy - correct answer A system that attempt to solve the basic economic problem. Micro-economics - correct answer The 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 answer The branch of economics that examines the behaviour of the whole economy Scarcity - correct answer Society has limited resources and therefore cannot produce enough goods and services to satisfy everyone's wants. Opportunity Cost - correct answer The next best alternative forgone when an economic decision is made Wants - correct answer Anything you would like irrespective of whether you have the resources to purchase it. Needs - correct answer Basic requirements for human survival Choice - correct answer The selection of appropriate alternatives. Ceteris Paribus - correct answer '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 answer This shows maximum quantities of different combinations of two products an economy can produce given current resources and the state of technology. Exporters - correct answer Firms that sell overseas. Market - correct answer A place or situation where buyers and sellers communicate with exchange in mind. Market Failure - correct answer Market 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 answer The amount of money that goods are exchanged for a transaction. Price Mechanism/Market System - correct answer The automatic determination of prices and the allocation of resources by the operation of markets in the economy. Subsidy - correct answer A grant given to producers, usually to encourage production of a certain good. Demand - correct answer The quantity of a product that consumers are willing and able to purchase at various prices over a period of time. Notional Demand - correct answer The desire for a product. Effective Demand - correct answer Only 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 answer Demand that arises because there is demand for another good. Demand Curve - correct answer A 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 answer A 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 answer Quantities of a product that suppliers are willing and able to sell at various prices per period