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Economics IB MYP5 Terms

Christine Laurich Economics HL ? English 62 cards

Cards in this deck (62)

  1. 1(Effective) DemandThe willingness and ability of customers to pay a certain price in a market to obtain a particular good or service.
  2. 2Capital goodsAny tangible assets that an organization uses to produce goods or services such as office buildings, equipment and machinery. Consumer goods are the end result of this production process.
  3. 3Ceteris paribusAll other things equal, i.e. holding all other factors the same to analyze effect of just one.
  4. 4ChoiceHave the option of alternatives in the allocation of your limited financial resources.
  5. 5Complements in productionThey are produced together, or one is a by-product of the other (e.g. beef producer can make leather, saw mills make boards and also produce wood chips as by-product).
  6. 6Consumer goodsProducts that are purchased for consumption by the average consumer. Alternatively called final goods, consumer goods are the end result of production and manufacturing and are what a consumer will see on the store shelf. Basic materials such as copper are not considered consumer goods because they must be transformed into usable products.
  7. 7Diminishing marginal utilityAfter a certain point, the satisfaction we gain from consuming each additional unit of a good declines.
    As the value of that unit declines, so will the maximum price we are willing to pay for it.
    We’re inclined to want to purchase more of a good at lower prices.
  8. 8EconomicsThe study of rationing systems, of how scarce resources are allocated to fulfill the infinite wants of consumers
  9. 9Explicit costsA business expense that is easily identified and accounted for. Explicit costs represent clear, obvious cash outflows from a business.
    Good examples of explicit costs would be items such as wage expense, rent or lease costs, and the cost of materials that go into the production of goods.
  10. 10Factors of Demand (PIRATES)P - Population
    I - Income
    R - Related goods
    A - Advertisment
    T - Tastes & Preferences
    E - Expected prices (in the future)
    S - Seasonal
  11. 11P of PiratesTarget group of consumers who can/want to buy the product
  12. 12I of PIRATESIncome.
    Financial/material wealth of consumers
  13. 13R of PIRATESRelated goods (for the consumer).
    Substitute goods (exchange one for the other – inversely related, e.g. Pepsi/Coke), Complementary goods (demand for one causes demand for the other – directly related, e.g. car/fuel).
  14. 14A of PIRATESAdvertisement.
    Communication used to encourage/persuade consumers, created by the seller
  15. 15T of PIRATESTastes & Preferences.
    Trends, styles, friends’ choices, seasonal attire
  16. 16E of PIRATESExpectation (of future prices)
    Higher price next week = buy now; lower price next week = buy then; price unchanged, buy when needed
  17. 17S of PIRATESSeasonal.
    Sales session to meet changing demands (e.g. winter, summer, spring, fall, cross-over, back-to-school, etc.)
  18. 18Factors of production (CELL)C - Capital
    E - Enterpreneurship
    L - Labor
    L - Land
  19. 19C of CellCapital.
    Capital is all of the tools and machinery used to produce a good or service.
  20. 20E of CELLEnterpreneurship.
    The entrepreneur is the individual who takes an idea and attempts to make an economic profit from it by combining all other factors of production. The entrepreneur also takes on all of the risks and rewards of the business.
  21. 21L of CELLLabor.
    Labor is all of the work that laborers and workers perform at all levels of an organization, except for the entrepreneur
  22. 22L of CELLLand.
    Land represents all natural resources, such as timber and gold, used in the production of a good.
  23. 23Free goodsNot limited in supply and therefore have no opportunity cost when they are consumed, e.g. regular air, salt water.
  24. 24Free Market SystemProducers and consumers decide what, how and for whom to produce through their exchange or trade in different goods and services. Suppliers will generate what they can sell at the highest price, as consumer choices dictate.
  25. 25GoodsTangible physical objects, e.g. vegetables, meat, cars, clothes.
  26. 26Implicit costsA cost that is represented by lost opportunity in the use of a company's own resources, excluding cash. The implicit cost for a firm can be thought of as the opportunity cost related to undertaking a certain project or decision, such as the loss of interest income on funds.
    Implicit costs can also be thought of as intangible costs that are not easily accounted for. For example, the time and effort that an owner puts into the maintenance of the company can be viewed as an implicit cost of running the business.
  27. 27Income effectAs the price of a good we purchase declines, our unchanged nominal income feels like more – in fact, our purchasing power, or real income, has risen. We feel richer and are therefore inclined to purchase more units of the things we want to buy.
  28. 28Inferior good (demand)Demand for this product will fall, if income rises and the consumer starts to buy higher priced substitutes in place of the inferior good; the demand curve for inferior products shifts left as the income increases. When income gets to a certain level, consumers will only buy the higher priced goods and the demand for the inferior good will become zero; the demand curve for it will disappear.
  29. 29Law of demandThe quantity demanded for a good or service falls as its price rises, ceteris paribus.
  30. 30Law of diminishing returnsAs people consumer more of a particular good or service, the utility (return or satisfaction) gained from the marginal unit declines, so customers will only purchase more at a lower price.
  31. 31Law of increasing opportunity costs- For every additional unit of one product made, more units of the other product are foregone than for the previous one.
    - ACDC Econ example: making one robot only sacrifices 1 pizza, making the second gives up 4 more, making the third robot means additional 10 pizzas less, making the fourth means an extra 15 less pizzas (i.e. none are being made anymore) – every additional robot costs more pizzas than the previous one.
    - Concave PPC due to that.
  32. 32Law of supplyThe law of supply states that as quantity supplied increases as the price increases, ceteris paribus.
  33. 33MarketWhere buyers and sellers come together to carry out an economic transaction; e.g. physical market place where goods are directly exchanged for money, online markets.
  34. 34Market EquilibriumThe intersection of the supply and demand curves: The market price and quantity satisfy the plans of the buyers reflected in the demand curve and the plans of the sellers reflected in the supply curve. At this unique price, the quantity supplied equals the quantity demanded.
  35. 35Market ForcesThe profit motive of firms and the changing preferences of consumers determine the allocation of resources, of how factors of production are used to solve the problem of what, how and for whom to produce.
  36. 36Mixed EconomiesCombines government planning with the use of the free market. People in the private sector own scarce resources with the aim of making as much profit as possible. In the public sector the government own some scarce resources to produce goods and services that they think their country, and its people, need and want (but that the private sector would not supply at a reasonable price).
  37. 37NeedsEssential to ensure survival, e.g. food, shelter, clothing
  38. 38Normal good (demand)As income rises, the demand for the product will also rise; demand curve shifts to the right.
  39. 39Opportunity CostWhat you give up in order to have something else or the next best alternative foregone when an economic decision is made.
  40. 40Planned economyThe government determines what, how and for whom is produced; it controls and allocates the resources and often sets the price as well.
  41. 41PPCProduction Possibilities Curve or Frontier; a curve depicting all maximum output possibilities for two or more goods given a set of inputs (resources, labor, etc.). The PPF assumes that all inputs are used efficiently.
  42. 42Price mechanismPrice (high or low) signals what consumers want and will influence profit-seeking producers.
  43. 43Private sectorMade up of all the organizations and firms owned by members of the general public, including private individuals and voluntary organizations. They own (buy or hire) the resources and decide how to use them.
  44. 44Public sectorResources for production are owned and controlled by a government; consists of government organizations and goods&services provided by the government, such as the state education, roads, public parks, armed forces, the legal system.
  45. 45Quantity demandedThe quantity of a good or service that consumers are willing and able to purchase at a given price in a given time period.
  46. 46ResourcesInputs that are used to make goods and services (CELL, technology, etc.)
  47. 47ScarcityWhen goods are finite but wants are infinite. Everything that has a price is scarce relative to people’s demand for it. The ability to purchase a good/service is determined by the amount of money the consumer has and the price set by the provider.
  48. 48ServicesIntangible efforts, e.g. car repairs, haircut, insurance.
  49. 49Substitutes in productionMade form the same inputs (e.g. peanut butter, peanut bars) which enables the supplier to trade production of one for the other.
  50. 50Substitution effectAs the price of a good rises, consumers have an incentive to seek out alternative goods that might fulfill their needs as well as the more expensive good.
    To whatever degree they can find substitutes that meet their needs, the quantity demanded of the expensive goods declines.
  51. 51SupplyRelationship between quantity produced per unit of time and the price of the good. It is how much suppliers are willing and able to bring to market at a given price.
  52. 52Supply shifters (TIGRESS)T - Technology
    I - Input prices
    G - Government policies
    R - Related goods' prices
    E - Expectations of future prices
    S - Suppliers
    S - Shocks & Weather
  53. 53T of TIGRESSAnything that enables faster, better, and cheaper production, i.e. raises productivity levels; e.g. training workers to be more efficient, breakthrough advances in research & development.
  54. 54I of TIGRESSInput prices.
    Changes in the cost of resources needed to produce a good affect the supply for that good inversely, e.g. wages make workers more expensive, which will shift the supply curve to the left.
  55. 55G of TIGRESSGovernment policies.
    Per-unit tax (supply shifts left): As suppliers have to collect and transfer the tax to the government, it means they will need a higher price than before in order to be willing to provide the same quantity of the good for sale. Per-unit subsidy (supply shifts right): as the government adds an amount to the amount paid by the consumer, the seller receives market price plus the subsidy payment and can thus sell the same quantity at a lower market price.
  56. 56R of TIGRESSRelated goods' prices.
    In the production process, substitutes in production are made form the same inputs (e.g. peanut butter, peanut bars) which enables the supplier to trade production of one for the other; as the price for one rises, production will shift to that one and decrease the supply of the other. Complements in production are produced together, or one is a by-product of the other (e.g. beef producer can make leather, saw mills make boards and also produce wood chips as by-product); as one increases, so does the other.
  57. 57E of TIGRESSExpectations of future prices.
    If a good’s value is expected to decrease, flood the market now; if you think it will catch a higher price later, increase inventory and wait for a higher market price.
  58. 58S of TIGRESSSuppliers.
    Number of producers/suppliers/sellers in the market.
  59. 59S of TIGRESSShocks & Weather.
    Unexpected, uncontrolled events outside the producer’s control, e.g. blizzard, earth quake, war, draught, disease.
  60. 60Universal inputsSome resources, like labor, electricity, and oil, are commonly used to produce or distribute many goods and services and are considered (near) universal inputs.
  61. 61Unrelated good (demand)A change in the price of one product will have no effect upon the demand for the other product, e.g. toilet paper and cars.
  62. 62WantsDesired, but not necessary for immediate physical survival, e.g. phones, TVs, computers.

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IB MYP5 (Grade 10) Terms for Economics (mainly focusing on demand and supply)
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