Tuesday, September 23, 2014

List of the Most Important Definition for Chapter 1: Basic Economic Ideas (CIE-AS)

This will be an extremely useful guide for students who are going to sit for the AS examination in October/ November examination:
1. Adam Smith: One of the founding fathers of Economics and the author of the famous book, The Wealth of Nations

2. Barter: The act of trading goods and services without the use of money

3. Capital: The factor of production which includes man-made products which assist in the production process

4. Ceteris paribus: a Latin term which literally means ‘holding other factors constant’

5. Cheques: A method of payment in which money is transferred from one individual’s account to another (it is not a form of money as what students usually thought)

6. Command economy (planned economy/ centrally planned economy/ communism): An economic system in which resources are allocated via state intervention

7. Division of labour: It is when a complicated task is broken down into many smaller parts each done repetitively by a small group of people or individuals

8. Double coincidence of wants: A situation in a barter system where the seller needs to find a buyer who wants what is being sold and where the seller also wants something that the buyer has got to offer

9. Economic goods: Goods that have a degree of scarcity and hence opportunity cost

10. Economic growth: An increase in the real GDP/ potential GDP/ productive capacity of an economy/ when PPC shifts outward

11. Economic problem: A situation where there are not enough resources to satisfy all the needs and wants

12. Entrepreneur: The individual who takes risk in combining other factors of production

13. Fixed capital: Inputs such as plant, buildings, machinery and vehicles that are used in the production process

14. Free goods: Goods that do not have any opportunity cost (oxygen and sunlight)

15. Interest: The income obtained by depositing money into banks

16. Investment: Spending onto capital equipment and buildings

17. Land: The factor of production which includes all natural resources that can be used in the production process

18. Labour: The factor of production which includes both mental and physical ability of human that goes into the production process

19. Liquidity: The extent in which a financial asset can be easily turned into cash

20. Macroeconomics: The study of economics at national and international level

21. Market: A way in which both the buyers and sellers interact for the exchange of products

22. Market economy (free market economy/ capitalism/ laissez-faire economy): An economic system where scarce resources are allocated via the interaction of demand and supply

23. Medium of exchange: The use of money as an acceptable means of payments between buyers and sellers

24. Mixed economy: An economic system in which scarce resources are allocated via both price mechanism and government intervention

25. Microeconomics: The study of the behaviour of relatively small economic units such as individuals, households and firms

26. Money: Anything that is acceptable by the society as a means of payment

27. Needs: Goods and services that are essential for human survival

28. Normative statement: A statement which contains value/ subjective judgement which cannot be clarified as true or false

29. Opportunity cost: It is the next best alternative forgone

30. Positive statement: A statement which is factual, cannot be argued and can be testified as true or false

31. Primary sector: Production which takes place in agriculture, fishing, forestry, mining and oil extraction

32. Production possibility curve/ frontier (PPC/ PPF): A curve that shows the maximum combination of two goods that can be produced in an economy if all resources are fully and efficiently utilised

33. Resources: Inputs available to an economy for use in the production of goods and services

34. Secondary sector: Production which takes place in manufacturing and construction

35. Specialisation: It is when individuals, firms and economies concentrate in producing output in which they have advantage

36. Standard of deferred payment: Refers to the use of money to purchase an output now but pay somewhere in the future

37. Store of value: Refers to the use of money to keep wealth

38. Tertiary sector: Production which comes in the form of provision of services

39. Transitional economy: An economy which was formerly centrally planned and which is now opening up to embrace more elements of the market economy

40. Unit of account (measure of value): Refers to the use of money to identify the value of a product

41. Value judgement: An opinion/ point of view

42. Wants: Goods and services that are not essential for human survival

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