Level 2
Level 1

Unit 5.1


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Trade off
The selection of one choice results in the loss of another
Opportunity cost
The economic cost of a good in terms of the next best alternative foregone
Price
The amount charged to the consumers
Revenue
= Price x Quantity (i.e. the total value of sales)
Demand
The willingness and ability of consumers to buy a good or service
Price insensitivity
Where changing the price of a product leads to a less than proportional change in demand
Price sensitivity
Where changing the price of a product leads to a more than proportional change in demand
Necessity
A good or service that a consumer views as essential
Substitute
A good or service which is a possible alternative to another good or service
Stakeholders
Groups who are interested in the performance of a business
Shareholders
The owners of a company. They buy shares which represent part ownership of the company
Dividends
Payments made to shareholders from the profits of the company. A reward for holding shares in the company.
Stakeholder conflict
The fact that different stakeholders will have different viewpoints about the same issue
Third party
A group or individual that is not directly involved in a decision or action
Externality
The effect of an economic decision on a third party for which no appropriate compensation is made
Negative externality
The negative effect of an economic decision on a third party for which no appropriate compensation is made
Positive externality
The positive effect of an economic decision on a third party for which no appropriate compensation is made