Rihaab


 Tajmohamed

  11R
Economics

  HL:

  Glossary

  List

  Unit

  2

UNIT 2: Glossary.
Market:

is where buyers and sellers interact by

exchanging goods and services, carrying out an
economic transaction.
e.g.
Physical Market= -Buyers and sellers meet


face-face.
- The market is physical (.e.g.
Supermarket).
- The product and services are
delivered physically.
- The market is not an
electronic market.
Virtual Market= -Takes place in an


e-commerce site.
- Buyers and sellers delivers
and receive money product
and services electronically.
- Buyers and sellers only meet
online.
- Market place is not physical.

Demand:

is the quantity of a good or service that

consumers are willing and able to purchase at a
given price in a given time period.
e.g. a group of people would buy 150 soft drinks
for $1.20 each in an afternoon. The demand
here for the soft drinks is at a price of $1.20
would be 150 units an afternoon.

Law of Demand:

a change in the price of the product itself will

lead to a change in the quantity demanded of
the product, i.e. a movement along the existing
demand curve.
*Price increases the Quantity demand
decreases.

Demand Curve:

is a graphic representation of the relationship

between quantity demand and price.

Income Effect:

the change in an individuals income and how

that change will impact the quantity demanded
of a good or service.
.e.g. the change in price- the people have less
purchasing, therefore the quantity demand
decreases.

Substitution Effect:

as the price of product decrease, quantity

demanded of that product increases and the
demand of the substitute product
decreases.
.e.g. Coke and pepsi, if the price of Coke
decreases the demand will increase, and the
demand of Pepsi will decrease.

Demand Schedule:

is a table listing quantities demanded of

goods/ services at different prices.

Normal Goods:

goods where demand increases and income

increases.
.e.g. iPhone 6.

Inferior Goods:

goods where demand decreases and income

increases.
.e.g. Ferrari.

Ceteris Paribus:

is when keeping everything thats

(realistically changing) to be

constant, and measuring the change

of one variable.
.e.g. as the price increases the

demand increases.

Supply:

the quantity of a good or service that

producers are willing and able to sell
over a price range in a given time
period, ceteris paribus.
.e.g, there is an increase of coke in the
summer, therefore the producers will
supply more coke as they receive
more income in that time period.

Rihaab

  Tajmohamed

  11R
Economics

  HL:

  Glossary

  List

  Unit

  2
Law of Supply:

as the price of a product rises, the quantity supplied of

the product will usually increase, ceteris paribus.
.e.g.There is a drought and very few strawberries are
available. More people want the strawberries than
there are berries available. The price of strawberries
increases dramatically.

Supply Schedule:
Why does the supply curve go up:

Because of the time frame,

diminishing returns.

is a table listing quantities demanded

of goods/services at different prices.

Compliments:

when goods are consumed together

.e.g. like bread and butter.

Substitutes:

are goods that can be replaced together,

as an alternative for a product.
.e.g. Coke and Pepsi, or Nike and Adidas.
Same product, different brands/quality.

ProBit:

Supply Curve:

The difference between the revenue

received from the sale of an output and
the opportunity cost of the inputs used.
This can be used as another name for
"economic value added".
Sales= Revenue
Out= Expenses
formula: R-E= ProDit.

graphic representation of the

relationship between product price
and quantity of product that a seller is
willing and able to supply.

Equilibrium:

when the demand for a product is equal

to the supply. (the intersection of S=D)

Allocative efBiciency:

Indirect Taxes:

a tax that increases the price of a

good so that consumers are actually
paying the tax by paying more for
the products.
.e.g. Fuel, liquor and cigarette
taxes.

resources being used the efXiciently,

possible in societies point of view i.e
from the consumers and producers point
of view.
*This occurs when markets are in
Pe=Qe with no external inDluences and
no external effects.

Rihaab

  Tajmohamed

  11R
Economics

  HL:

  Glossary

  List

  Unit

  2

Market efBiciency:

when markets use their resources

efXiciently.
-Producers (proXit)
-Consumers (satisfying the societies
needs).

Consumer Surplus:

the highest price consumers are willing

to pay for a good minus the price actually
paid for the product (P1-Pe).

Producer surplus:
Conspicuous Consumption:

the purchase of goods or services

for the speciXic purpose of
displaying one's wealth.
.e.g. when one buys voss- which is
an expensive brand of normal
water, instead of buying normal
water bottle that is worth a half of
Vosss price.

as the price received by Xirms for selling

their goods minus the lowest price that
they are willing to accept to produce the
good (Pe-P1).

Marginal Social BeneBit(MSB):

as the total beneXit reaped from

consuming or producing one more
unit (i.e. at the margins) of any
product or service.
*the marginal beneXit will decrease as
consumption increases.
.e.g. If this consumer is willing to pay
$10 for that additional burger, then
the marginal beneXit of consuming
that burger is $10. The more burgers
the consumer has, the less he or she
will want to pay for the next one. This
is because the beneXit decreases as the
quantity consumed increases.

Marginal Social Cost (MSC):

the total cost to society as a whole for

producing one further unit, or taking one
further action, in an economy.
*when the society has to compromise in
order to get access from another product.
.e.g. market of coal plant, is polluting a
local river. Since we need the coal for
cooking (etc) the society has to bear such
consequences in order to get hold on the
product- coal.

Community service:

consumer surplus + producer

surplus.
*Should be in currency units ($)

Maximum Surplus:

it is at the equilibrium points. As the

producers and consumers meet
together and are equal.

Rihaab

  Tajmohamed

  11R
Economics

  HL:

  Glossary

  List

  Unit

  2

Price Mechanism:

it is where the forces of demand and

supply determining the prices of
commodities and the changes
therein. Where the government has
to intervene and lower the prices to
be affordable for the poor people
too.
e.g. the Government of India
recently passed an order to
decontrol the prices of diesel and
remove it from the jurisdiction of
the government. Now the prices will
be determined by the demand from
consumers and supply from the oil
companies.

Non-price Determinants of Demand:

include;
D=(Px,Pc,Ps,Yd,T/F, Exp,N.E.F.)

Px: the price of a product/service.

Pc: the price of compliments.
Ps: the price of a substitute.
Yd:disposal income, when a person has
to decide on what items is worth to
spent on.
Exp: expectations from the society, in
terms of increase/decrease of price of a
product.
N.E.F: Non economical factor, when the
government interferes with the market
production, by demanding taxes, that
impacts the prices of a product to
decrease.

Unrelated goods:

are independent goods, that do not

relate to one another.
.e.g. butter and golf balls, the change
in the price of one has little or no
effect on the demand for the other
product.

Non-price Determinants of Supply:

include;
S=(Px,COP,Po,Tech,Exp, N.E.F.)
Px: the price of a product/service.
COP: cost of production,how much
the factors of production cost the
producers{rent, wages..}.
Po: the price of another product, when
the market of a product is not as
proXitable as another product that uses
the same resources
.e.g. roller skates is a loss, the
producers will produce skateboards,
using the same resources, as it is in
demand.
Tech: technology improves,
producing more products in a short
period of time (shifts the supply curve
to the right).
Exp: expectations from the society, in
terms of increase/decrease of price of a
product.
N.E.F: Non economical factor, when the
government interferes with the market
production, by demanding taxes, that
impacts the prices of a product to
decrease.