1.2 Flashcards
Marginal utility
Additional utility/ benefit gained from consumption of each additional unit
Price elastcittt of demand
Measures the responsiveness of quantity demanded to a change in price
Supply
Goods and services firms are willing and able to provide to customers at given time period
Demand
Amount consumers are willing and able to buy a certain good at a given price in a given period of time
Rationality
Higher price the more a firm will be willing to supply to market
Shortage
When demand for goods and services greater than supply and not enough to meet everybody’s needs
Surplus
Supply of goods and services is greater than demand and too much of item available in market
Producer surplus
Difference between what producers prepared to sell a product or service for and the price theh actually receive
Consumer surplus
Difference between what a conundrum is prepared to pay for a product and what they actually pay
Dead weight loss
Loss of economic efficiently in terms of utility for consumer/ producer such that optimal or allocative efficeny isn’t achieved
Allocative efficiency
Where demand meets supply = max consumer surplus
Disequilibrium solved by
ARSI
Price elasticity of demand
How responsive demand is to a change in price
Direct tax
Paid by one entity/ consumer cannot be passed on
Indirect tax
Tax usually placed on purchase where cost of tax can be passed on
Ad valorem tax
Tax that is percentage of sale added on
Subsidy
Grant given by gov to producers to encourage production of a good or service
asymmetric information
one party has more information than the other leading to market failure
consumer surplus
difference between price consumer is wiling to pay and wha they actulll pay
enterprise
one of four factors of production -willingess and ability to take risks and combine the three other factors
habitual behaviour
a cause of irrational behaviour
YED
responsiveness of demand to change in income
inferior goods
less than 0
goods that see fall in demand as income increases
labour
human capital
