6 Flashcards
What is an ad valorem tax?
An indirect tax imposed on a good where the value of the tax is dependent on the value of the good.
What is asymmetric information?
Where one party has more information than the other, leading to market failure.
What is capital?
One of the four factors of production; goods which can be used in the production process.
What are capital goods?
Goods produced in order to aid production of consumer goods in the future.
What does ceteris paribus mean?
All other things remaining the same.
What is a command economy?
All factors of production are allocated by the state, so they decide what, how and for whom to produce goods.
What are complementary goods?
Negative XED; if good B becomes more expensive, demand for good A falls.
What are consumer goods?
Goods bought and demanded by households and individuals.
What is consumer surplus?
The difference between the price the consumer is willing to pay and the price they actually pay.
What is cross elasticity of demand (XED)?
The responsiveness of demand for one good (A) to a change in price of another good (B).
%change in QD of A / %change in P of B
What is demand?
The quantity of a good/service that consumers are able and willing to buy at a given price at a given moment of time.
What is diminishing marginal utility?
The extra benefit gained from consumption of a good generally declines as extra units are consumed; explains why the demand curve is downward sloping.
What is division of labour?
When labour becomes specialised during the production process so do a specific task in cooperation with other workers.
What is the economic problem?
The problem of scarcity; wants are unlimited but resources are finite so choices have to be made.
What is enterprise?
When resources are allocated optimally, so every consumer benefits and waste is minimised.
What is enterprise in economics?
One of the four factors of production; the willingness and ability to take risks and combine the three other factors of production.
