BSEB Intermediate Economics key terms

The situation in which available resources are limited relative to the unlimited wants of people, so choices must be made about how to use them.

The value of the next best alternative given up when a choice is made; it is measured by the benefit forgone from the option not selected.

A curve showing the maximum combinations of two goods an economy can produce when all resources are fully and efficiently used with given technology.

The three basic questions every economy must answer: what to produce, how to produce, and for whom to produce, arising from scarcity of resources.

The branch of economics that studies individual units such as a single consumer, a single firm, or one market, and how prices are determined there.

The branch of economics that studies the economy as a whole, dealing with aggregates such as national income, general price level, and total employment.

The satisfaction a consumer derives from consuming a good or service; it is subjective and cannot be measured in absolute units.

The addition to total satisfaction resulting from consuming one more unit of a good, other things remaining the same.

The principle that as a consumer takes more units of a good in a given period, the additional satisfaction from each extra unit falls.

The statement that, other things being equal, quantity demanded of a good rises when its price falls and falls when its price rises.

A graph showing the relationship between the price of a good and the quantity demanded at each price, usually sloping downward from left to right.

A change in demand caused by factors other than the good's own price, such as income, tastes, or prices of related goods, moving the whole curve.

A good whose demand increases when consumer income rises and decreases when income falls, holding other factors constant.

A good whose demand falls when consumer income rises, because consumers switch to better substitutes as their purchasing power improves.

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

A situation where the percentage change in quantity demanded is greater than the percentage change in price, so the elasticity coefficient exceeds one.

A situation where the percentage change in quantity demanded is smaller than the percentage change in price, so the elasticity coefficient is less than one.

The short-run principle that as more units of a variable input are added to fixed inputs, marginal product first rises, then falls, and may become negative.

The addition to total output produced by employing one more unit of a variable factor of production, other factors held constant.

The total quantity of output produced by a firm with a given quantity of inputs over a specified period of time.

Output per unit of a variable input, obtained by dividing total product by the number of units of that input employed.

The long-run principle describing how output changes when all inputs are increased in the same proportion, giving increasing, constant, or decreasing returns.

The total expenditure incurred by a firm on inputs such as labour, raw materials, and capital needed to produce a given level of output.

Cost that does not change with the level of output in the short run, such as rent on a factory or insurance premiums.

Cost that changes directly with the quantity of output produced, such as spending on raw materials and wages of casual labour.

The addition to total cost from producing one more unit of output, equal to the change in total cost divided by the change in quantity.

The quantity of a good that producers are willing and able to offer for sale at a given price during a given period, other things equal.

The statement that, other things being equal, quantity supplied of a good rises when its price rises and falls when its price falls.

A graph showing the quantity of a good producers are willing to sell at each price, normally sloping upward from left to right.

A market structure with many small buyers and sellers, a homogeneous product, free entry and exit, and no individual able to influence price.

A market structure in which a single seller supplies a product with no close substitutes and barriers prevent other firms from entering.

A market with many sellers offering differentiated products that are close substitutes, where each firm has some limited power over its price.

A market dominated by a few large sellers whose decisions about price and output are interdependent, so each must consider rivals' reactions.

The situation where quantity demanded equals quantity supplied at a particular price, so there is neither excess demand nor excess supply.

The price at which the quantity of a good demanded by buyers exactly equals the quantity sellers offer, clearing the market.

The total money value of all final goods and services produced by a country's normal residents during an accounting year.

The market value of all final goods and services produced within the domestic territory of a country in a year, regardless of producer nationality.

The market value of all final goods and services produced by the normal residents of a country in a year, including net factor income from abroad.

The difference between factor income earned by a country's residents from abroad and factor income earned by foreigners within the country.

Anything generally accepted as a medium of exchange, a measure of value, a store of value, and a standard of deferred payment.

A financial institution that accepts deposits from the public and lends money to borrowers, thereby creating credit in the economy.

The apex monetary authority of a country that issues currency, controls credit, and acts as banker to the government and commercial banks.

The process by which commercial banks expand total deposits by lending out a fraction of the deposits they receive, based on the reserve ratio.

The relationship between total consumption expenditure and the level of income, showing how much households spend at each income level.

The proportion of an additional unit of income that households spend on consumption, calculated as change in consumption divided by change in income.

The number by which an initial change in investment or spending is multiplied to give the final change in national income.

An annual statement of the estimated receipts and expenditures of the government for a financial year, presented to the legislature.

The excess of total government expenditure over total receipts excluding borrowings, indicating how much the government must borrow.

The excess of revenue expenditure over revenue receipts of the government, showing the shortfall in meeting recurring spending from recurring income.

A systematic record of all economic transactions between a country's residents and the rest of the world during a given year.

The part of the balance of payments recording trade in goods and services, income flows, and unilateral transfers between a country and abroad.

The part of the balance of payments recording transactions in financial assets and liabilities, such as loans, investments, and banking capital.

The price of one country's currency expressed in units of another country's currency, determined by demand and supply in the forex market.

A fall in the value of a domestic currency relative to a foreign currency under a flexible exchange rate system, making exports cheaper abroad.

A deliberate reduction in the value of a domestic currency in terms of foreign currencies, carried out by the government under a fixed exchange rate system.