HSC Economics key terms

The value of the next best alternative given up when a choice is made. It reflects scarcity, because using resources for one purpose means forgoing the benefits of another.

The condition where resources are limited relative to the unlimited wants of individuals and society. It forces choices about what, how and for whom to produce.

A curve showing the maximum combinations of two goods an economy can produce when all resources are fully and efficiently employed, given current technology and resource quantities.

A situation where resources are distributed among goods and services in line with consumer preferences, so that the last dollar spent yields equal marginal benefit across markets.

The quantities of a good or service consumers are willing and able to buy at various prices over a period, other things equal. Price and quantity demanded normally move in opposite directions.

The quantities of a good or service producers are willing and able to offer for sale at various prices over a period, other things equal. Higher prices normally encourage greater quantities supplied.

The market price at which the quantity demanded equals the quantity supplied, so there is no tendency for price to change. It clears the market, leaving neither shortage nor surplus.

A measure of how responsive quantity demanded is to a change in price, calculated as the percentage change in quantity demanded divided by the percentage change in price.

A measure of how responsive quantity supplied is to a change in price, calculated as the percentage change in quantity supplied divided by the percentage change in price.

The system in which prices, moving with demand and supply, signal scarcity and coordinate decisions of buyers and sellers without central direction, guiding resource allocation in a market economy.

When a free market fails to allocate resources efficiently, producing too much or too little of a good relative to the social optimum, often due to externalities, public goods or market power.

A cost or benefit arising from production or consumption that falls on third parties not involved in the transaction, and which is not reflected in the market price.

A good that is non-rival and non-excludable, meaning one person's use does not reduce availability to others and users cannot easily be prevented from consuming it.

The loss of total economic surplus that occurs when a market produces a quantity different from the efficient level, such as under a tax, monopoly or externality.

A tax levied on goods and services, such as the GST, that raises the price paid by consumers and shifts the supply curve upward by the amount of the tax.

A payment by government to producers or consumers that lowers the effective cost or price of a good, shifting the supply curve downward and usually increasing the quantity traded.

The total market value of final goods and services produced within a country's borders over a period, usually a year or quarter, used as a headline measure of economic activity.

Gross domestic product adjusted for changes in prices, so it measures changes in the volume of output rather than the effect of inflation on nominal values.

An increase in the volume of goods and services an economy produces over time, commonly measured as the percentage change in real GDP per capita.

The recurring pattern of expansion and contraction in economic activity around a long-run trend, marked by booms, downturns, recessions and recoveries.

A sustained increase in the general level of prices over time, which reduces the purchasing power of money and is usually measured by the percentage change in a consumer price index.

A measure of the average change over time in the prices paid by households for a fixed basket of goods and services, used to estimate the inflation rate.

The number of people actively looking for work but unable to find it, expressed as a percentage of the labour force, where the labour force includes employed and unemployed people.

The proportion of the civilian population aged 15 and over that is either employed or actively seeking work, showing how many people are engaged in the labour market.

The total planned expenditure on goods and services in an economy at a given price level, made up of consumption, investment, government spending and net exports.

The total volume of goods and services producers in an economy are willing and able to supply at various price levels over a period, influenced by costs and productive capacity.

The use of government spending and taxation by the government to influence the level of aggregate demand, resource allocation and income distribution in the economy.

Actions by the central bank to influence interest rates and the money supply, mainly to control inflation and support sustainable growth and employment.

A situation where government spending exceeds government revenue in a given period, requiring borrowing and adding to public debt.

The accumulated total of money owed by government from past borrowing, often expressed as a percentage of gross domestic product to indicate its relative size.

A record of all transactions between residents of a country and the rest of the world over a period, comprising the current account and the capital and financial account.

The part of the balance of payments recording trade in goods and services, net primary income such as profits and interest, and net secondary income transfers.

The price of one currency expressed in terms of another, determined in foreign exchange markets by demand and supply, or fixed by authorities.

A rise in the value of a currency against another currency under a floating exchange rate, making imports cheaper and exports dearer in foreign currency terms.

A fall in the value of a currency against another currency under a floating exchange rate, making imports dearer and exports cheaper in foreign currency terms.

The ratio of a country's export prices to its import prices, showing how many imports can be purchased with a given volume of exports.

The ability of a country to produce a good at a lower opportunity cost than another country, providing the basis for mutually beneficial specialisation and trade.

Government policies such as tariffs, quotas and subsidies that restrict imports to shield domestic producers from foreign competition, usually raising domestic prices.

A tax imposed on imported goods, which raises their domestic price, reduces import volumes and generates revenue for the government while protecting local producers.

International trade conducted without government-imposed barriers such as tariffs or quotas, allowing goods and services to move between countries based on comparative advantage.