Secondary 4 Economics

Wants are unlimited while resources are limited, so goods cannot satisfy all wants — the root of economic problems.

Human wants keep arising and can never be fully satisfied — one cause of scarcity.

Resources such as land, labour and capital are insufficient relative to wants — the other cause of scarcity.

A good so abundant that even at a zero price it would not fall short; consuming it involves no opportunity cost.

A good insufficient relative to wants; obtaining it requires giving up something else.

Under scarcity, people must decide which uses get the resources and which wants are satisfied.

The highest-valued option forgone when a choice is made — the cost of choosing.

What to produce? How to produce? For whom to produce? — the questions every society must answer.

The mechanism that allocates resources through prices: goods go to those willing and able to pay.

The highest-valued option forgone when a choice is made, covering monetary and non-monetary sacrifices.

Among the options given up, the one valued most highly by the decision-maker; it defines opportunity cost.

Direct spending in money terms — only part of the full opportunity cost.

The cost of obtaining resources earlier: borrowing incurs interest, and spending savings forgoes interest income.

Concentrating on producing a few goods or tasks to raise efficiency.

Swapping goods or services; exchange is the precondition of specialisation.

The party that produces more output with the same resources (or the same output with fewer resources).

The party with a lower opportunity cost of producing a good; one can hold it without any absolute advantage.

After specialising by comparative advantage and trading, both sides obtain goods more cheaply than making them, and total output rises.

The rate at which two goods exchange; for both sides to gain, the rate must lie between their opportunity costs.

The quantity consumers are willing and able to buy at each price, other things being equal.

Ceteris paribus, price and quantity demanded move in opposite directions: a higher price means less demanded.

The amount consumers are willing and able to buy at a given price, determined by the good's own price.

Non-price factors shifting the whole demand curve left (a decrease) or right (an increase).

Goods that can replace each other; a rise in a substitute's price raises demand for this good.

Goods used together; a rise in a complement's price lowers demand for this good.

The quantity producers are willing and able to sell at each price, other things being equal — the DSE term for 'supply'.

Changes in costs, technology and other non-price factors shifting the whole supply curve.

The state where quantity demanded equals quantity supplied, with no tendency for price or quantity to change.

The price at which quantity demanded equals quantity supplied; the corresponding trade volume is the equilibrium quantity.

The responsiveness of quantity demanded to a price change: % change in quantity demanded ÷ % change in price.

Computing the percentage changes from the averages of the before and after values — the DSE method.

Elasticity greater than one: quantity demanded responds more than proportionally to price.

Elasticity less than one: quantity demanded responds less than proportionally to price.

Elasticity equal to one: the percentage changes match, so total revenue is unchanged.

Price times quantity sold; how it changes depends on the price elasticity of demand.

Goods hard to do without, with few substitutes — demand is usually inelastic.

Non-essential goods whose purchase can be postponed — demand is usually elastic.

The responsiveness of quantity supplied to a price change: % change in quantity supplied ÷ % change in price.

A key determinant of demand elasticity: the more substitutes available, the more elastic the demand.

The maximum legal price set by the government; binding below equilibrium, it creates a shortage.

The minimum legal price set by the government; binding above equilibrium, it creates a surplus.

A situation where quantity demanded exceeds quantity supplied at a price — the result of an effective ceiling.

A situation where quantity supplied exceeds quantity demanded at a price — the result of an effective floor.

When prices are controlled, buyers and sellers compete through queuing, rationing and selection instead of price.

A government cap on the amount that may be sold or produced; it cuts quantity and raises the price.

The supply curve under a quota: it turns vertical at the quota, so no price can raise output beyond it.

A fixed tax charged per unit; it shifts supply up, raises the price and cuts the quantity.

A fixed government payment per unit; it shifts supply down, lowers the price and raises the quantity.

How the tax is actually shared between consumers and producers, depending on elasticities; inelastic demand means buyers bear more.

The resources needed to produce goods and services: human, natural and man-made resources (labour, land, capital and entrepreneurship).

The producing unit that decides what goods and services to make and hires the factors of production.

The physical and mental effort workers supply within human resources; supply depends on the working population.

Output per unit of labour over a period, shaped by training, experience and equipment.

The function of combining the other factors, making decisions and bearing risk; profit is the reward for risk-taking.

All natural resources — sites, minerals, the sea and forests; supply is almost fixed.

Man-made resources used in production, such as machines, factories and tools — man-made resources.

The wear and loss of value of capital in use; capital must be continually replaced and accumulated.

Splitting production into lines or tasks assigned to different workers or regions; simple, complex and regional.

Different regions specialising in different goods according to their advantages, as among Greater Bay Area cities.