Scarcity
The condition that exists because finite resources are insufficient to satisfy unlimited human wants, making choice unavoidable.
IB Economics terminology
Word bank
Use precise economic terms when you explain a model or answer a question. The word bank connects definitions to diagrams, examples and practice.
Choice
A decision about how scarce resources will be allocated between competing uses.
Opportunity cost
The value of the next best alternative forgone when a choice is made.
Factors of production
The resources used to produce goods and services: land, labour, capital and entrepreneurship.
Production possibilities curve
A curve showing the maximum combinations of two goods or categories of goods that an economy can produce with its available resources and technology when those resources are fully and efficiently used.
Productive efficiency
A situation in which output is produced at the lowest possible average cost and resources cannot be reallocated to produce more of one good without producing less of another.
Allocative efficiency
A situation in which the combination of goods and services produced matches society’s preferences. In a market diagram it occurs at the quantity where marginal social benefit equals marginal social cost.
Equity
The principle of fairness in the distribution of income, wealth, opportunities or economic outcomes. What is considered equitable involves value judgements.
Demand
The quantity of a good or service that consumers are willing and able to buy at different prices during a given period, ceteris paribus.
Quantity demanded
The amount of a good or service consumers are willing and able to buy at one particular price during a given period.
Law of demand
The principle that, ceteris paribus, quantity demanded falls as price rises and rises as price falls.
Supply
The quantity of a good or service that producers are willing and able to offer for sale at different prices during a given period, ceteris paribus.