Download IB Economics HL: Key Concepts and Answers and more Exams Economics in PDF only on Docsity!
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Ceteris paribus CORRECT ANSWERS✅ all other things are being held equal. positive economics CORRECT ANSWERS✅ matters of economics that can be proven to be right or wrong by looking at the facts. normative economics CORRECT ANSWERS✅ matters of economics that are based upon opinion and so are incapable of being proven to be right or wrong scarcity CORRECT ANSWERS✅ the limited availability of economic resources relative to societys unlimited demand for goods and services land CORRECT ANSWERS✅ the physical factor of production. It consists of natural resources labour CORRECT ANSWERS✅ the human factor of production. It is the physical and mental contribution of the existing work force to production capital CORRECT ANSWERS✅ the factor of production that is made by humans and is used to produce goods and services. It occurs as a result of investment
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entrepreneurship CORRECT ANSWERS✅ the factor of production involving organizing and risk-taking opportunity cost CORRECT ANSWERS✅ is the next best alternative foregone when an economic decision is made free good CORRECT ANSWERS✅ goods or services which are unlimited in supply and have no opportunity cost. the have unlimited supply at market price zero economic good CORRECT ANSWERS✅ a good or services which is relatively scarce and so have a price. An opportunity cost is involved if it is consumed. utility CORRECT ANSWERS✅ the satisfaction or pleasure that an individual derives from the consumption of a good or service production possibility curve CORRECT ANSWERS✅ shows the maximum combination of outputs that can be production by an economy in a given time period
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sustainable development CORRECT ANSWERS✅ development that meets the needs of the present without compromising the ability of future generations to meet their own needs free market economy CORRECT ANSWERS✅ an economy where the means of production are privetly held by individuals and firms. Demand and supply determine how much to produce, how/how many to produce, an for whom to produce. planned economy CORRECT ANSWERS✅ an economy where the means of production are owned by the state. The state determines how much to produce how much to produce, how/how many to produce, and for whom to produce. Transition economy CORRECT ANSWERS✅ an economy in the process of moving from a centrally planned economic system towards a more market-oriented economic system. demand CORRECT ANSWERS✅ the willingness and ability to purchase a quantity of a good or service at a certain price over a given time period
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law of demand CORRECT ANSWERS✅ as a price of a good falls, quantity demanded increases velben goods CORRECT ANSWERS✅ goods that are the exceptions to the law of demand, where at high prices, as price increases, then so does the demand giffen goods CORRECT ANSWERS✅ goods that are exceptions to the law of demand where at very low prices, with consumers on low incomes and dependent upon the good for survival, as price rises, then so does demand supply CORRECT ANSWERS✅ the willigness and ability of a producer to produce a good or service at a given price law of supply CORRECT ANSWERS✅ as the price of a good rises the quantity supplied rises maximum price CORRECT ANSWERS✅ a price imposed by the authority and set below the market price
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income elasticity CORRECT ANSWERS✅ measure of the responsiveness of demand for a good or service to a change in income normal goods CORRECT ANSWERS✅ a good where the demand increases as income increases inferior goods CORRECT ANSWERS✅ a good where the demand for it decreases as income increases price elasticity of supply CORRECT ANSWERS✅ measure of the responsiveness of the quantity supplied of a good or service when there is a change in its price elastic supply CORRECT ANSWERS✅ where a change in price of a good or service leads to a proportionately larger change in the quantity supplied inelastic supply CORRECT ANSWERS✅ where a change in price of a good or service leads to a proportionately smaller change in the quantity supplied indirect tax CORRECT ANSWERS✅ tax on expenditure. It is added to the selling price of a good or service
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flat rate tax CORRECT ANSWERS✅ an indirect tax where a specific amount is added to the selling price of each unit ad valorem tax CORRECT ANSWERS✅ an indirect tax where a percentage is added to the selling price of each unit subsidy CORRECT ANSWERS✅ an amount paid by the government to a firm per unit of output fixed costs CORRECT ANSWERS✅ costs that do not change with the level of output. variable costs CORRECT ANSWERS✅ costs that vary with the level of output total costs CORRECT ANSWERS✅ fixed costs plus variable costs average cost CORRECT ANSWERS✅ total cost/quantity produced. the ____cost of production per unit
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economies of scale CORRECT ANSWERS✅ they are a fall in long run unit average costs that come about as a result of a firm increasing its scale of production diseconomies of scale CORRECT ANSWERS✅ they are an increase in long run unit average costs that come about as a result of a firm increasing its scale of production total revenue CORRECT ANSWERS✅ the aggregate revenue gained by a firm from the sale of a particular quantity of output average revenue CORRECT ANSWERS✅ total revenue received divided by the number of units sold marginal revenue CORRECT ANSWERS✅ the extra revenue gained from selling one more unit of a good or service normal profits CORRECT ANSWERS✅ the amount of revenue needed to cover the total costs of production including opportunity cost
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abnormal profits CORRECT ANSWERS✅ the level of profit that is greater than the total costs of production including opportunity cost profit maximizing level of output CORRECT ANSWERS✅ the level of output where marginal revenue is equal to marginal cost shut down price CORRECT ANSWERS✅ the price where average revenue is equal to average variable cost. Below this price, the firm will shut down in the short run break even price CORRECT ANSWERS✅ the price where average revenue is equal to average total cost. Below this price, the firm will shut down in the long run allocative efficiency CORRECT ANSWERS✅ the level of output where marginal cost is equal to average revenue. productive efficiency CORRECT ANSWERS✅ when production is achieved at lowest cost per unit of output
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monopoly CORRECT ANSWERS✅ a market form where there is only one firm in the industry natural monopoly CORRECT ANSWERS✅ a situation where there are only enough economies of scale available in a market to support one firm contestable market CORRECT ANSWERS✅ a market that appears to be an oligopoly or monopoly, where the threat of potential competition forces firms to behave in a more competitive manner than theory would predict price discrimination CORRECT ANSWERS✅ it occurs when a producer charges different prices to different customers for an identical good or service market failure CORRECT ANSWERS✅ the failure of markets to produce at the socially efficient level of output positive externalities CORRECT ANSWERS✅ they are beneficial effects that are enjoyed by a third party when a good or service is produced or consumed
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negative externalities CORRECT ANSWERS✅ they are the 'bad' effects that are suffered by a third party when a good or service is produced or consumed sustainable development CORRECT ANSWERS✅ development that meet the needs of the present generation without compromising the ability of future generations to meet their own needs public good CORRECT ANSWERS✅ goods and services which would not be provided at all by the market - non-rivalry and non-diminishability merit goods CORRECT ANSWERS✅ goods or services considered to be beneficial for people that would be under-provided by the market and so under-consumed demerit goods CORRECT ANSWERS✅ goods and services considered to be harmful to people that would be over-provided by the market and so over-consumed. tradable permits CORRECT ANSWERS✅ they are permits to pollute, issued by a governing body, which sets a maximum amount of pollution allowable.
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deflationary gap CORRECT ANSWERS✅ the situation where the equilibrium level of output is less than the full employment level of output, thus causing unemployment fiscal policy CORRECT ANSWERS✅ a policy using government spending and/or direct taxation to achieve economic objectives monetary policy CORRECT ANSWERS✅ a policy using changes to money supply or interest rates to achieve economic objectives aggregate supply CORRECT ANSWERS✅ the total amount of domestic goods and services supplied by businesses and the government, including both consumer and capital goods multiplier CORRECT ANSWERS✅ the ratio of an included change in the level of national income to an original change in one or more of the injections into the circular flow of income accelerator CORRECT ANSWERS✅ the relationship between the level o induced investment and the rate of change of national income
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crowding out CORRECT ANSWERS✅ a situation where the government spends more than it receives and needs to borrow money, forcing up interest rates and pushing private investment and private consumption. unemployment CORRECT ANSWERS✅ the number of people without a job, who are actively seeking work full employment CORRECT ANSWERS✅ exists when the number of jobs available in an economy is equal to or greater than the number of people actively seeking work underemployment CORRECT ANSWERS✅ exists when workers are carrying out jobs for which they are over-qualified structural unemployment CORRECT ANSWERS✅ unemployment that exists when in long-term the pattern of demand and production methods change and there is a permanent fall in the demand for a particular type of labour
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direct taxation CORRECT ANSWERS✅ taxation imposed on peoples income or wealth, and on a firms profit laffer curve CORRECT ANSWERS✅ showing the possible relationship between income tax rates and total tax revenue lorenz curve CORRECT ANSWERS✅ showing what percentage of the population earns what percentage of the total income in the economy. gini coefficient CORRECT ANSWERS✅ measures the ratio of the area between a lorenz curve and the line of absolute equality to the total area under the line of equality factor endowment CORRECT ANSWERS✅ factors of production that a country has available to product goods and services absolute advantage CORRECT ANSWERS✅ where a country is able to produce more output than other countries using the same input of factors of production
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comparative advantage CORRECT ANSWERS✅ where a country is able to produce a good at a lower opportunity cost of resources than another country free trade CORRECT ANSWERS✅ international trade that takes place without any barriers tariff CORRECT ANSWERS✅ a duty tax that is placed upon imports to protect domestic industries from foreign competition quota CORRECT ANSWERS✅ import barriers that set limits on the quantity or value of imports that may be imported into a country dumping CORRECT ANSWERS✅ selling of a good in another country at a price below its unit cost of production customs union CORRECT ANSWERS✅ an agreement made between countries where the countries agree to trade freely among themselves and also agree to adopt common external barriers against any country attempting to import into the
