Alvins' sicker definitions Flashcards
Aggregate demand (AD)
The total demand for a countries goods and services at a given price in a given time period
Aggregate supply (AS)
The total amount that producers in an economy are willing and are able to supply at a given price level in a given time period
Allocative efficiency
Where consumer satisfaction is maximised
Arithmetic mean
The sum of the items divided by the number of the items
Asymmetric information
Information that is not shared equally between two parties
Automatic stabilisers
Forms of government spending and taxation that change automatically to offset fluctuations in economic activity
Average propensity to consume (APC)
The proportion of disposable income spent. It is calculated by consumer expenditure divided by disposable income
Average propensity to save
The proportion of disposable income saved. Calculated by dividing savings by disposable income
Balance of payments
A record of all transactions between one country and the rest of the world
Capital utilisation
The extent to which firms are using their capital goods
Capital
Man made aids to production
Ceteris paribus (other things being equal)
Assumption that other variables will remain unchanged
Choice
The selection of appropriate alternatives
Claimant count
A measure of unemployment that includes those that are receiving unemployment related benefits
Command economy
An economic system in which resources are state owned and are also allocated centrally
Complements
Goods for which there is joint demand
Consumer confidence
How optimistic consumers are about future economic prospects
Consumer price index
A measure of changes in the price of a representative basket of consumer goods and services
Differs from retail price index in methodology and coverage
Cost push inflation
Increase in price level caused by increases in the cost of production
Cross elasticity on demand (XED)
The responsiveness of demand for one product in relation to a change in the price of another product
Cyclical unemployment
Unemployment arising from a lack of aggregate demand
Demand pull inflation
Increase in price level due to the increase in aggregate demand
Demand schedule
The data that is used to draw the demand curve of a product
Demerit goods
Their consumption is more harmful that is actually realised
Developing economy
An economy with a low level of income per head
Direct tax
Tax that taxes the income of firms and people and cannot be avoided
Disposable income
Income, after taxes on income have been deducted and state benefits have been added
Dissave
Spending more than your disposable income
Division of labour
Where the production process is broken down into separate tasks and individual workers will specialise in one task
Economic cycle
The tendency for economy activity to fluctuate outside its trend growth rate, moving from a high level of economic activity to a low level
Economic efficiency
When both allocative and productive efficiency are achieved
Economic growth
An increase in the productive potential of an economy(Can be shown using a PPC graph)
Economically inactive
People of working age who are not willing and/or able to work
Basic economic problem
Wants are infinite but resources are scarce
Resulting in the issue of what to produce, how to produce, and whom to produce to
Economics
The study of how to allocate scare resources in the most efficient way
Economic system
The way in which production is organised in a country or a group of countries
Effective demand
The willingness and ability to buy a product
Efficiency
Where the best use of resources is made for the benefit of consumers
Elastic
Responsive to a change in market conditions
Elasticity
The extent to which buyers and sellers react to changes in the market conditions
Entrepreneurship
The willingness of an entrepreneur To take risks and organise production
Equilibrium price
The price where demand and supply are equal
Equilibrium quantity
The quantity that is demanded at the equilibrium price
External benefits
The benefits that accrue as a consequence of externalities to third parties
Externality
An effect whereby those not directly involved in taking a decision are affected by the actions of others
Deflationary
Of policy measures designed to reduce aggregate demand
Discretionary fiscal policy
Deliberate changes in government spending and taxation designed to influence aggregate demand
Disequilibrium
When supply and demand are not equal within a market
Factor endowment
The stock of factors of production
Factors of production
The resource inputs that are available within a economy to produce goods and servicesLand capital enterprise and labour
Fiscal drag
People’s incomes being dragged into higher tax bands due to tax brackets not being adjusted in line with inflation
Fiscal policy
The taxation and spending decisions of a government
Free market economy/mechanism
The system by which the market forces of demand and supply determine prices and the decisions are made by consumers and firms
Free rider
Someone hi directly benefits from the consumption of a public good but who does not contribute towards its provision
Frictional unemployment
Short term unemployment that occurs between the transition from one job to another
Government bond
A financial asset issued by the central or local government
GDP
The total value of goods and services produce by an economy over a year
Household
A group of people whose spending decisions are connected
Human capital
Education, training and experience that a worker, or a group of workers, possesses
Hyperinflation
When the inflation rate exceeds 50% and causes serious economic problems and political instability
Hysteresis
Unemployment that causes unemployment:
When long term unemployment reduces the workers chance of getting a job as firms fear they are bad workers or that their skills are outdated
Income elastics
Goods for which a change in income produces a greater proportionate change in demand
Income elasticity
The responsiveness of demand to a change in income
Income inelastic
Goods for which a change in income produces a less than proportionate change in demand
Index number
A number showing the variation in, for example, wages or prices, a compared with a chosen base or period or date
Indirect tax
Tax that is levied on goods and services
Inefficiency
Any situation where economic efficiency is not achieved
Scarcity
The idea that we have limited/finite resources that are insufficient to meet infinite wants
Opportunity cost
The value of the next best alternative foregone when a choice is made
PPC (production possibility curve)
Represents the maximum output combinations of 2 goods that can be produced given the current level of resources and technology
Productive potential / productive capacity
The maximum output that an economy is capable of producing
Pareto efficiency
Where one person cannot be made better off without someone else being made worse off
Productive efficiency
Where production takes place using the least amount of resources
Specialisation
The concentration of a worker, group of workers, firm, region or whole economy on the production of a narrow range of goods and services
Exchange
The process by which goods and services are traded
Want
Anything a consumer would like irrespective of whether they have the means to purchase it
Need
The things we actually need to survive. The basic needs are food, water, shelter, and warmth. Everything else we may wish to purchase is a want
Positive statement
A statement based on fact