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

These are some of the most important terms in Chapter 1 (AS) of our CIE Economics:

 

1. Barter: The direct trading of goods and services without the use of money

2. Capital: Man-made resources to assist in the production of goods and services such as

3. Choice: Is what someone must make when faced with two or more alternative uses of a resource (also known as economic choice)

  
4. Centrally planned economy/ command economy: An economic system which allocates scarce resources via central planning and whereby private sectors are not allowed to exist

5. Division of labour (specialisation): It is when a complicated task is broken down in many smaller units, each done repetitively by a group of workers or individuals

6. Economic goods: Goods that have an opportunity cost

7. Economic growth: It is when there is an increase in the production possibility curve/ outward shift of the production possibility curve/ potential output

8. Factors of production: They are inputs such as land, labour, capital and enterprise used in the production of goods and services 

9. Free goods: Goods that are naturally abundant and so do not incur any opportunity cost

10. Free market economy: An economic system which mainly uses the price mechanism to allocate scarce resources and whereby government intervention is assumed to be minimal to none

11. Land: Natural resources or gifts of nature that are used to produce goods and services

12. Labour: The quantity and quality of human effort directed towards producing goods and services

13. Mixed economy: An economic system which allocates scarce resources through both price mechanism and central planning, where both exist to overcome the weaknesses of one another

14. Money: Anything that is generally accepted as a medium of payment for goods and services

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

16. Normative statement: A statement that contains subjective/ value judgement and therefore cannot be proven to be true or false as both side of opinions can be equally right

17. Opportunity cost: The value of the next best alternative forgone

18. Primary sector: It is the sector of an economy which involves the extraction and production of raw materials

19. Positive statement: A statement that can be proven to be either true or false and is therefore not arguable

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

21. Secondary sector: It is the sector of an economy which processes raw materials/ natural resources into finished and semi-finished goods

22. Scarcity: It is the state of being inadequate or short in supply 

23. Tertiary sector: It is the sector of an economy which provides services to both businesses as well as consumers

24. Wants: Goods and services that are not essential but people desire them to improve their standard of living