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| Question | Answer |
| Scarcity | Situation in which people have unlimited wants with limited resources |
| Opportunity Cost | The cost of the next best alternative forgone |
| Market equilibrium | when the price is such that the quantity that consumers wish to buy is balanced by the quantity that firms wish to supply |
| elasticity | a measure of the sensitivity of one variable to changes in another |
| Price elasticity of demand | a measure of the sensitivity of QD to a change in the price of a good |
| income elasticity of demand | a measure of the sensitivity of quantity demanded to a change in consumer incomes |
| cross price elasticity of demand | the sensitivity of quantity demanded of a good to a change in the price of another good |
| price elasticity of supply | the sensitivity of the quantity supplied to a change in price |
| consumer surplus | value that consumers gain from consuming a good or service over the price paid |
| producer surplus | the difference between the price and received by a firm for a good and the price that they would have been prepared to supply the good at |
| marginal cost | the cost of producing an additional unit of output |
| productive efficiency | when a firm operates at minimum cost and maximum product output |
| allocative efficiency | when society produces an appropriate bundle of goods relative to consumer preferences |
| technical efficiency | gaining maximum possible output from a given set of inputs |
| cost efficiency | the best combination of inputs of factors of production given the relative prices of those factors |
| Market failure | when there is not an optimal allocation of resources |
| externality | a cost or benefit that is not reflected in the market price of a good |
| private cost | incurred by an individual as part of its economic activity |
| external cost | borne by a third party |
| private good | consumed by one person only |
| public good | non-exclusive and non-rivalrous |
| free rider | when an individual cannot be excluded from consuming a good and therefore doesn't pay for its provision |
| Merit good | brings unanticipated benefits to consumers |
| demerit good | has more negatives than realised |
| asymmetric information | when some people in the market have better information about market conditions than others |
| government failure | misallocation of resources from government intervention |
| indirect tax | tax levied on goods. VAT |
| Incidence of tax | the tax is split between the buyer and the seller |
| subsidy | a government grant given to producers to encourage supply |
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