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🎶📒MicroEconomics > 1. Microeconomics 1 > Flashcards

1. Microeconomics 1 Flashcards

1
Q

Allocative efficiency

A

The allocation of Resources that maximises consumer welfare- associated with price= marginal cost

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2
Q

Basic economic problem

A

Unlimited human wants and limited resources with competing uses (scarcity)

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3
Q

Capital

A

Man made aids to production

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4
Q

Ceteris paribus

A

All other things being equal

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5
Q

Consumer durable goods

A

Tangible goods, use more than once

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6
Q

Consumer non durable goods

A

Tangible goods used once by households

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7
Q

Cost benefit principle

A

A rational agent will weigh up the costs and benefits of a decision, will act when benefits are at least equal to the costs.

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8
Q

Division of labour

A

Breaking down the production process into smaller parts- specialisation- increase productivity.

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9
Q

Dynamic efficiency

A

Becoming more productively efficient overtime- usually as a result of investment.

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10
Q

Economics

A

Usually defined as the allocation of scarce resources

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11
Q

Enterprise

A

Individual risks combining the other 3 Factors of production. Deciding what, how, who.

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12
Q

Equitable

A

Fair
Requires a value judgement

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13
Q

Free market economy

A

Resource allocation is left to market forces
Most willing and able to buy receive

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14
Q

Labour

A

Physical/ mental effort from workers

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15
Q

Land

A

All naturally occurring resources in, on, under ground

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16
Q

Mixed economy

A

Economic system- resource allocation partly by government and market forces

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17
Q

Normative statement

A

A statement based on a value judgement / opinion

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18
Q

Opportunity cost

A

Benefit foregone from the next best alternative, include a trade off

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19
Q

Pareto optimum

A

A situation where nobody can be made better off without someone else being made worse off.

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20
Q

Planned economy

A

Government allocates resources rather than market forces

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21
Q

Positive statement

A

An objective statement
Factually verifiable
hypothesis- can be tested

(Don’t need to be true)

Normative- value judgement

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22
Q

Production

A

Factor inputs to outputs

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23
Q

PPF

A

Illustrated graphically the productive capacity of the economy. Shows all possible combinations of 2 outputs an economy can produce, given its initial factor endowment, current productivity and technology.

24
Q

Productivity

A

Output produced per unit of input

25
Q

Productive efficiency

A

Producing at the lowest possible average costs- requires technical efficiency

26
Q

Rational utility maximiser

A

Someone who acts rationally to maximise their own welfare

27
Q

Scarcity

A

Not enough to satisfy everyone’s wants and needs

28
Q

Services

A

Buying someone’s time and skill

29
Q

Social science

A

Scientific methods to study social phenomena

30
Q

Static efficiency

A

Being (productive/ allocative) Efficient at at a given moment in time

31
Q

Technical efficiency

A

Producing Maximum output from given levels of inputs

32
Q

Trade off

A

Improvement in one variable leads to a deterioration in another

33
Q

Utility

A

Benefit gained from the consumption of a good or service

34
Q

X-inefficiency

A

Difference between technical efficiency and the performance of a firm that has little incentive to reduce unit costs and pursue profit, usually because they have price-setting ability

35
Q

It’s hard to experiment because it is often not practical or ethical

A

Economists can’t have the same level of control as a natural scientist has under laboratory conditions
Must assume ceteris paribus
Can gather data- may not be perfect- may be from a different country & is certainly from a different time period
Use data to produce economic models- can be refined and the predictions will be more accurate

36
Q

Reasons people don’t maximise their utility

A

*lack of info/ unreliable info
*habit/gut decisions
*mental health/ stress
*addictions- drug/alcohol
*moral/political/religious viewpoints
*substance abuse
*prioritising short run benefits over long term costs
*other people’s utility & altruism

37
Q

Economics acts as a discipline to understand how markets & economies operate and to inform public policy- how the gov should act to improve welfare of citizens- make value judgements

A
38
Q

Factors of production

A

Land
Labour
Capital
Enterprise

39
Q

The purpose of economic activity is

A

To produce goods and services to satisfy human wants and needs

40
Q

The key economic decisions are:

A

*What to produce
*How to produce
*Who for/ who benefits

41
Q

4 outputs :

A

*Capital goods (man made aids to production)

*Non durable consumer goods
*Durable consumer goods
*Services (buy someone’s time and skill)

42
Q

All points on the off

A

Productively efficient
Using all factors of production fully
Only way to produce more of 1 is less of another

43
Q

Productively inefficient

A

Productively inefficient inside the ppf
Under/ unemployed resources

Increase production of one good without reducing the other

44
Q

Outside the PPF

A

Beyond the maximum the economy can produce even when the factors of production are fully employed
Impossible in the current time period
May be possible in the future if their is an increase in factor endowment or improved productivity or technology

45
Q

Straight line PPF

A

factors of production have the same marginal rate of technical substitutability
The opportunity cost doesn’t change/ is constant

Curve is because in the production of most goods- some labour/capital is better suited to the production of one good and therefore using more of it to produce the other good yields less output
Opportunity cost changes along the curve so it’s curved

46
Q

The flatter the part of the curve the greater the opportunity cost of producing the good on the vertical axis

A

Steep curve the opportunity cost of producing the good on the horizontal axis higher

47
Q

If the productive capacity of an economy changes

A

The PPF will shift

48
Q

Productivity

A

Output produced for given levels of inputs

Total output per time period ➗ number of units of factor of production

49
Q

Labour productivity

(Remember units)

A

Total output ➗ man hours

50
Q

100 workers 8 hour shift 100,000 boxes

A

Output= 100,000
Man hours= 100 x 8

100,000➗800= 125 boxes

PER MAN PER HOUR

51
Q

Labour productivity :

A

Training, specialisation, supervision

trained- skill level improved- more output/more valuable- increasing productivity

52
Q

Total factor productivity:

A

Average productivity of all physical factors of production

Total output➗total input

53
Q

Advantages of higher productivity:

A

*lower average costs- may result in lower consumer prices
*improved competitiveness in international markets
*higher profits- can be reinvested
*higher real wages- wage often rises-
Firms more willing and able- retain productive staff
*economic growth

54
Q

How can a firm be technically but not productively efficient?

A

TE is absence of waste
Productive= max output for given input

expensive oranges
expensive labour

Need to be TE to be PE

55
Q

A movement within a PPF to on a PPF generally represents a Pareto improvement

A

(Nobody can be made any better off without someone else being made worse off)

56
Q

Issues with specialisation:

A

Occupational immobility of labour- workers lack transferable skills- can lead to unemployment

Boredom

57
Q

One reason why specialisation can raise labour productivity is because :

A

Division of labour makes it cost efficient to provide workers with specialist equipment

🎶📒MicroEconomics (7 decks)

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