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IGCSE Test Prep Economics Definition > 2 The allocation of resources > Flashcards

2 The allocation of resources Flashcards

1
Q

Microeconomics

A

the study of the behaviour and decisions of household and firms, and the performance of individual markets.

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2
Q

Macroeconomics

A

the study of the whole economy

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3
Q

Market

A

an arrangement which brings buyers into contact with sellers

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4
Q

Economic agents

A

those people who undertake economic activities and make economic decisions

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5
Q

Economic systems

A

the institutions, organisations and mechanisms that influence economic behaviour and determine how resources are allocated

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6
Q

Planned economic system

A

an economic system where the government makes the crucial decisions, land and capital are state-owned and resources are allocated by directives

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7
Q

Mixed economic system

A

an economy in which both the private and public sectors play an important role

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8
Q

Price mechanism

A

the way the decisions made by households and firms interact to decide the allocation of resources

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9
Q

Market economic system

A

an economic system where consumers determine what is produced, resources are allocated by the price mechanism and land and capital are privately owned

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10
Q

Capital- intensive

A

the use of a high proportion of capital relative to labour

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11
Q

Labour-intensive

A

the use of a high proportion of labour relative to capital

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12
Q

Market equilibrium

A

a situation where demand and supply are equal at the current price

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13
Q

Market disequilibrium

A

a situation where demand and supply are not equal at the current price

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14
Q

Demand

A

the willingness and ability to buy a product

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15
Q

Market demand

A

total demand for a product

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16
Q

Extension in demand

A

a rise in the quantity demanded caused by a fall in the price of the product itself.

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17
Q

Aggregation

A

the addition of individual components to arrive at a total amount

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18
Q

Contraction in demand

A

a fall in the quantity demanded caused by a rise in the price of the product itself.

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19
Q

Changes in demand

A

shifts in the demand curve

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20
Q

increase in demand

A

a rise in demand at any given price, causing the demand curve to shift to the right

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21
Q

Decrease in demand

A

a fall in demand at any given price, causing the demand curve to shift to the left

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22
Q

Normal goods

A

a product whose demand increases when income increases and decreases when income falls

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23
Q

Inferior goods

A

a product whose demand decreases when income increases and increases when income falls

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24
Q

Substitute

A

a product that can be used in place of another

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25
Q

Complement

A

a product that is used together with another product

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26
Q

Ageing population

A

an increase in the average age of the population

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27
Q

Birth rate

A

the number of live births per thousand of the population in a year

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28
Q

Supply

A

the willingness and ability to sell a product

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29
Q

Market supply

A

total supply of a product

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30
Q

Extension in supply

A

a rise in the quantity supplied caused by a rise in the price of the product itself.

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31
Q

Contraction in supply

A

a fall in the quantity supplied caused by a fall in the price of the product itself.

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32
Q

Changes in supply

A

changes in supply conditions causing shifts in the supply curve

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33
Q

Increase in supply

A

a rise in supply at any given price, causing the supply curve to shift to the right

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34
Q

Decrease in supply

A

a fall in supply at any given price, causing the supply curve to shift to the left

35
Q

Improvements in technology

A

advances in the quality of capital goods and methods of production

36
Q

Unit cost

A

the average cost of production. It is found by dividing total cost by output

37
Q

Direct taxes

A

taxes on the income and wealth of individuals and firms

38
Q

Indirect taxes

A

taxes on goods and services

39
Q

Tax

A

a payment to the government

40
Q

Subsidy

A

a payment by the government to encourage the production or consumption of a product

41
Q

Equilibrium price

A

the price where demand and supply are equal

42
Q

Disequilibrium

A

a situation where demand and supply are not equal

43
Q

Excess supply

A

the amount by which supply is greater than demand

44
Q

Excess demand

A

the amount by which demand is greater than supply

45
Q

Price elasticity of demand (PED)

A

a measure of the responsiveness of the quantity demanded to a change in price

46
Q

Elastic demand

A

when the quantity demanded changes by a greater percentage than the change in price

47
Q

Inelastic demand

A

when the quantity demanded changes by a smaller percentage than the change in price

48
Q

Perfectly elastic demand

A

when a change in price causes a complete change in the quantity demanded

49
Q

Perfectly inelastic demand

A

when a change in price has no effect on the quantity demanded

50
Q

Unit elasticity of demand

A

when a change in price causes an equal change in the quantity demanded, leaving total revenue unchanged.

51
Q

Price elasticity of supply (PES)

A

a measure of the responsiveness of the quantity supplied to a change in price

52
Q

Elastic supply

A

when the quantity supplied changes by a greater percentage than the change in price

53
Q

Inelastic supply

A

when the quantity supplied changes by a smaller percentage than the change in price

54
Q

Perfectly elastic supply

A

when a change in price causes a complete change in the quantity supplied

55
Q

Perfectly inelastic supply

A

when a change in price has no effect on the quantity supplied

56
Q

Unit elasticity of supply

A

when a change in price causes an equal change in the quantity supplied

57
Q

Public sector

A

the part of the economy controlled by the government

58
Q

State-owned enterprises (SOEs)

A

organisations owned by the government which sell products

59
Q

Privatisation

A

the sale of public assets to the private sector

60
Q

Price mechanism

A

the system by which the market forces of demand and supply determine prices

61
Q

Market failure

A

market resources resulting in an inefficient allocation of resources

62
Q

Free rider

A

someone who consumes a good or service without paying it

63
Q

Allocative efficiency

A

when resources are allocated to produce the right products in the right quantities

64
Q

Productively efficient

A

when products are produced at the lowest possible cost and making full use of resources

65
Q

Dynamic efficiency

A

efficiency occurring over time as a result of investment and innovation

66
Q

Third parties

A

those not directly involved in producing or consuming a product

67
Q

Social benefits

A

the total benefits to a society of an economic activity

68
Q

Social costs

A

the total costs to a society of an economic activity

69
Q

Private benefits

A

benefits received by those directly consuming or producing a product

70
Q

Private costs

A

costs bome by those directly consuming or producing a product

71
Q

External benefits

A

benefits enjoyed by those who are not involved in the consumption and production activities of others directly

72
Q

External costs

A

costs imposed on those who are not involved in the consumption and production activities of others directly

73
Q

Socially optimum output

A

the level of output where social cost equals social benefit and society’s welfare is maximised

74
Q

Merit goods

A

products which the government considers consumers do not fully appreciate how beneficial they are and so they will be under-consumed if left to market forces. Such goods generate positive externalities.

75
Q

Demerit goods

A

products which the government considers consumers do not fully appreciate how harmful they are and so they will be over-consumed if left to market forces. Such goods generate negative externalities

76
Q

Public good

A

a product which is non-rival and non-excludable hence needs to be financed by taxation.

77
Q

Private goods

A

a product which is both rival and excludable

78
Q

Monopoly

A

a single seller

79
Q

Price fixing

A

when two or more firms agree to sell a product at the same price

80
Q

Mixed economic system

A

an economy in which both the private and public sectors play an important role

81
Q

Rationing

A

a limit on the amount that can be consumed

82
Q

Lottery

A

the drawing of tickets to decide who will get the products

83
Q

Nationalisation

A

moving the ownership and control of an industry from the private sector to the government

84
Q

Public corporation

A

a business organisation owned by the government which is designed to act in the public interest

IGCSE Test Prep Economics Definition (3 decks)

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