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The economic problem
The need to make choices regarding how to allocate limited resources between unlimited and competing wants
Specialisation
The concentration of a worker, firm, region or country on a narrow range of tasks or goods and services
Opportunity cost
The next best alternative foregone when a choice is made
Production Possibility Frontier (PPF)
The maximum output combinations of two goods and services that can be produced with all resources fully employed
Factors of production
Land, labour, capital and enterprise
Market
Any interaction between buyers and sellers for the exchange of goods and services
Demand
The quantity of a good or service that consumers are willing and able to purchase at a given price over a specified period of time
The conditions of demand
The price of the good or service
The prices of substitutes
The prices of complements
Households' disposable income and wealth
Tastes and fashion
Ceteris paribus
Other things (e.g. the other determinants of demand) remaining equal; essential for ensuring that the effects of changes in only one variable can be analysed
Price elasticity of demand (PED)
The responsiveness of the quantity demanded to a change in price
(% change in quantity demanded / % change in price)
Demand is price-elastic if PED > 1 (ignoring the -)
Demand is price-inelastic if 0 < PED < 1
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