List of the Most Important Definitions for Chapter 1-Basic Economic Ideas (A2)

For students taking A2 (Chapter 1):

1. Average revenue: Total revenue for every one unit of output sold, which is also known as price

2. Allocative efficiency: It is where scarce economic resources are combined in such a way to produce the highest number of output which matches the needs and wants of the people

3. Economic efficiency: It is where scarce economic resources are used in the most cost efficient way to produce the highest number of output to fulfill as many wants and needs as possible

4. Optimum resource allocation: The best allocation of resources possible in given circumstances

5. Marginal benefit: Additional total benefit gained from the consumption of extra one unit of output

6. Marginal utility: Additional total utility gained from the consumption of extra one unit of output

7.Pareto efficiency: It is where both productive and allocative efficiency have been achieved and the only way to make one person better off is by making another worse off

8. Pareto improvement: It is an economic idea where at least one person can be made better off without causing another person to be worse off

9. Productive efficiency: It is where scarce economic resources are used in the most cost efficient way to produce the highest number of output

10. Social efficiency: It is where scarce resources are combined in such a way to produce outputs that people value the most, taking into consideration all internal and external benefits and costs

11. Technical efficiency: A situation where firm produces the highest level of output from given inputs