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AS Economics > Alvins' sicker definitions > Flashcards

Alvins' sicker definitions Flashcards

1
Q

Aggregate demand (AD)

A

The total demand for a countries goods and services at a given price in a given time period

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2
Q

Aggregate supply (AS)

A

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

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3
Q

Allocative efficiency

A

Where consumer satisfaction is maximised

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4
Q

Arithmetic mean

A

The sum of the items divided by the number of the items

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5
Q

Asymmetric information

A

Information that is not shared equally between two parties

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6
Q

Automatic stabilisers

A

Forms of government spending and taxation that change automatically to offset fluctuations in economic activity

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7
Q

Average propensity to consume (APC)

A

The proportion of disposable income spent. It is calculated by consumer expenditure divided by disposable income

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8
Q

Average propensity to save

A

The proportion of disposable income saved. Calculated by dividing savings by disposable income

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9
Q

Balance of payments

A

A record of all transactions between one country and the rest of the world

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10
Q

Capital utilisation

A

The extent to which firms are using their capital goods

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11
Q

Capital

A

Man made aids to production

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12
Q

Ceteris paribus (other things being equal)

A

Assumption that other variables will remain unchanged

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13
Q

Choice

A

The selection of appropriate alternatives

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14
Q

Claimant count

A

A measure of unemployment that includes those that are receiving unemployment related benefits

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15
Q

Command economy

A

An economic system in which resources are state owned and are also allocated centrally

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16
Q

Complements

A

Goods for which there is joint demand

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17
Q

Consumer confidence

A

How optimistic consumers are about future economic prospects

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18
Q

Consumer price index

A

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

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19
Q

Cost push inflation

A

Increase in price level caused by increases in the cost of production

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20
Q

Cross elasticity on demand (XED)

A

The responsiveness of demand for one product in relation to a change in the price of another product

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21
Q

Cyclical unemployment

A

Unemployment arising from a lack of aggregate demand

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22
Q

Demand pull inflation

A

Increase in price level due to the increase in aggregate demand

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23
Q

Demand schedule

A

The data that is used to draw the demand curve of a product

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24
Q

Demerit goods

A

Their consumption is more harmful that is actually realised

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25
Q

Developing economy

A

An economy with a low level of income per head

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26
Q

Direct tax

A

Tax that taxes the income of firms and people and cannot be avoided

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27
Q

Disposable income

A

Income, after taxes on income have been deducted and state benefits have been added

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28
Q

Dissave

A

Spending more than your disposable income

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29
Q

Division of labour

A

Where the production process is broken down into separate tasks and individual workers will specialise in one task

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30
Q

Economic cycle

A

The tendency for economy activity to fluctuate outside its trend growth rate, moving from a high level of economic activity to a low level

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31
Q

Economic efficiency

A

When both allocative and productive efficiency are achieved

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32
Q

Economic growth

A

An increase in the productive potential of an economy(Can be shown using a PPC graph)

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33
Q

Economically inactive

A

People of working age who are not willing and/or able to work

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34
Q

Basic economic problem

A

Wants are infinite but resources are scarce

Resulting in the issue of what to produce, how to produce, and whom to produce to

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35
Q

Economics

A

The study of how to allocate scare resources in the most efficient way

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36
Q

Economic system

A

The way in which production is organised in a country or a group of countries

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37
Q

Effective demand

A

The willingness and ability to buy a product

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38
Q

Efficiency

A

Where the best use of resources is made for the benefit of consumers

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39
Q

Elastic

A

Responsive to a change in market conditions

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40
Q

Elasticity

A

The extent to which buyers and sellers react to changes in the market conditions

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41
Q

Entrepreneurship

A

The willingness of an entrepreneur To take risks and organise production

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42
Q

Equilibrium price

A

The price where demand and supply are equal

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43
Q

Equilibrium quantity

A

The quantity that is demanded at the equilibrium price

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44
Q

External benefits

A

The benefits that accrue as a consequence of externalities to third parties

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45
Q

Externality

A

An effect whereby those not directly involved in taking a decision are affected by the actions of others

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46
Q

Deflationary

A

Of policy measures designed to reduce aggregate demand

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47
Q

Discretionary fiscal policy

A

Deliberate changes in government spending and taxation designed to influence aggregate demand

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48
Q

Disequilibrium

A

When supply and demand are not equal within a market

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49
Q

Factor endowment

A

The stock of factors of production

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50
Q

Factors of production

A

The resource inputs that are available within a economy to produce goods and servicesLand capital enterprise and labour

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51
Q

Fiscal drag

A

People’s incomes being dragged into higher tax bands due to tax brackets not being adjusted in line with inflation

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52
Q

Fiscal policy

A

The taxation and spending decisions of a government

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53
Q

Free market economy/mechanism

A

The system by which the market forces of demand and supply determine prices and the decisions are made by consumers and firms

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54
Q

Free rider

A

Someone hi directly benefits from the consumption of a public good but who does not contribute towards its provision

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55
Q

Frictional unemployment

A

Short term unemployment that occurs between the transition from one job to another

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56
Q

Government bond

A

A financial asset issued by the central or local government

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57
Q

GDP

A

The total value of goods and services produce by an economy over a year

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58
Q

Household

A

A group of people whose spending decisions are connected

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59
Q

Human capital

A

Education, training and experience that a worker, or a group of workers, possesses

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60
Q

Hyperinflation

A

When the inflation rate exceeds 50% and causes serious economic problems and political instability

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61
Q

Hysteresis

A

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

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62
Q

Income elastics

A

Goods for which a change in income produces a greater proportionate change in demand

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63
Q

Income elasticity

A

The responsiveness of demand to a change in income

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64
Q

Income inelastic

A

Goods for which a change in income produces a less than proportionate change in demand

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65
Q

Index number

A

A number showing the variation in, for example, wages or prices, a compared with a chosen base or period or date

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66
Q

Indirect tax

A

Tax that is levied on goods and services

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67
Q

Inefficiency

A

Any situation where economic efficiency is not achieved

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68
Q

Scarcity

A

The idea that we have limited/finite resources that are insufficient to meet infinite wants

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69
Q

Opportunity cost

A

The value of the next best alternative foregone when a choice is made

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70
Q

PPC (production possibility curve)

A

Represents the maximum output combinations of 2 goods that can be produced given the current level of resources and technology

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71
Q

Productive potential / productive capacity

A

The maximum output that an economy is capable of producing

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72
Q

Pareto efficiency

A

Where one person cannot be made better off without someone else being made worse off

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73
Q

Productive efficiency

A

Where production takes place using the least amount of resources

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74
Q

Specialisation

A

The concentration of a worker, group of workers, firm, region or whole economy on the production of a narrow range of goods and services

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75
Q

Exchange

A

The process by which goods and services are traded

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76
Q

Want

A

Anything a consumer would like irrespective of whether they have the means to purchase it

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77
Q

Need

A

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

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78
Q

Positive statement

A

A statement based on fact

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79
Q

Normative statement

A

A statement that is based upon opinion

80
Q

Economic good

A

A good which has a positive opportunity cost since it requires the use of economic resources to be able to consume it

81
Q

Free good

A

A good with zero opportunity cost since it requires no use o economic resources to be able to consume it

82
Q

Trade-off

A

The calculation involved in deciding whether to give up one good for another good

83
Q

Gross investment

A

Total value of capital goods created in an economy in a given time period

84
Q

Capital consumption

A

Reduction in value of capital goods due to depreciation becoming obsolete in a given time period

85
Q

Net investment

A

= Gross investment - capital consumption in a given time period

86
Q

Effective demand

A

The quantity of a product that consumers are willing and able to purchase at different gnarled prices over a period of time

87
Q

Consumer surplus

A

The difference between the value a consumer is prepared to pay for a good or service and the price that is actually required to make the purchase

88
Q

First law of demand

A

Price and quantity demand are inversely related to each other

89
Q

Ceteris paribus

A

All other things being equal

90
Q

Conditions/determinants of demand

A

Non-price factors that affect the level of demand for a good or service

91
Q

PED

A

The responsiveness of quantity demanded of a good to a chinge in its price

92
Q

Price elastic demand

A

When quantity demanded is very responsive to a change in price

93
Q

Price inelastic demand

A

When quantity demand is not very responsive to a change in price

94
Q

YED

A

The responsiveness of quantity demanded to a change in income

95
Q

Normal good

A

Goods for which an increase in income leads to an increase in demand

96
Q

Income elastic demand

A

When quantity demanded is very responsive to a change in income

97
Q

Income inelastic demand

A

When quantity demanded is very responsive to a change in income

98
Q

Inferior good

A

Goods for which an increase in income leads to a fall in demand

99
Q

XED

A

The responsiveness of quantity demanded of one good to change in price of another good

100
Q

Complementary good

A

Goods for which there is joint demand

101
Q

Substitute good

A

A competing good in which a consumer makes a choice between one or the other

Goods which have positive XED

102
Q

Total revenue

A

Price x quantity sold

103
Q

Effective supply

A

The quantity of a product that producers are willing and able to supply at different market prices over a period of time

104
Q

Producer surplus

A

The difference between the price actually recieved by producers for a good/service and the price that they are willing to pay

105
Q

Conditions of supply

A

Non-price factors that affect the level of supply for a good or service

106
Q

Indirect tax

A

A tax levied on the consumption of goods and services

107
Q

Incidence of taxation

A

The way in which the burden of taxation is divided between buyers and sellers

108
Q

Subsidy

A

A payment (usually from the governement) to encourage production by lowering the costs of production per unit

109
Q

Price elasticity of supply (PES)

A

The responsiveness of quantity supplied of a good/service to a change in its price

110
Q

Determinants of PES

A

Factors that affect the extent to which QS is responsive to price

111
Q

Market

A

Any situation which brings together buyers and sellers for the purpose of trading goods or services

112
Q

Price system

A

A method of allocating resources by the free movement of prices

113
Q

Equilibrium quantity

A

The quantity that is demanded and supplied at the equilibrium price

114
Q

Equilibrium price = Market clearing price

A

The price where quantity supplied and demanded are equal

115
Q

Market equilibrium

A

The price and quantity at which demand is equal to supply

116
Q

Disequilibrium

A

Any situation position in a market where demand and supply are not equal

117
Q

Shortage

A

An excess of demand over supply

118
Q

Market failure

A

Where the free market mechanism fails to achieve economic efficiency

119
Q

Allocative efficiency

A

Where scarce resources are used to produce the goods and services that consumers actually demand in the quantities they desire, so consumer welfare is maximised

120
Q

Economic efficiency

A

Where allocative and productive efficiency are achieved

121
Q

Allocative inefficiency

A

Where resources are over or under allocated to the production of a particular good or service

122
Q

Externality

A

Where an action taken by one economic agent has an effect on a third party not directly involved in the activity

123
Q

Negative externality (external cost)

A

When social costs of an activity are greater than the private costs

124
Q

Positive externality

A

When social benefits of an economy are greater than the private benefits

125
Q

Third party

A

Person/group of people not directly involved in making a decision

126
Q

Private cost

A

The costs directly incurred by those undertaking a particular economic activity

127
Q

Private benefit

A

The benefits directly accuring to those undertaking a particular economic activity

128
Q

Social cost

A

Private cost + external cost of an economic activity

129
Q

Social benefit

A

Private benefit + external benefit of economic activity

130
Q

Socially optimum output

A

The output quantity where full social cost is equal to full social benefit

131
Q

Assymetric information

A

When information is not equally shared between two parties

132
Q

Merit good

A

A good whose consuption is better for consumers than they actually realise. Hence consumers underestimate the private benefits of consumption and will under consume this good in a free market

133
Q

Demerit good

A

A good whose consumption is actually more harmful to consumers than they actually realise

134
Q

Public good

A

A good which is non excludable and non rivalrous in consumption and will therefore not be provided by the free market due to the free rider problem

135
Q

Non excludable

A

A situation where it is technically impossible or financially unviable for individual consumjers to be excluded from consuming a good/service

136
Q

Private good

A

A good which is rivalrous and excludable in consumption

137
Q

Non-rivalrous

A

Situation where consumption by one person does not reduce its availability for consumption by others

138
Q

Quasi public good

A

Goods that have some, but not all, of the characteristics of a public good

139
Q

Free rider problem

A

When someone directly benefits from the consumption of a public good without contributing towards its provision

140
Q

Direct provision

A

When the government steps into the supply of a good/service

141
Q

Internalising an externality

A

An attempt to deal with an externality by bringing it within the price system

142
Q

Green/Carbon tax

A

A tax on emissions of greenhouse gases

143
Q

Tradable pollution permits

A

A permit which allows the owner to emit a certain amount of pollution and which can be sold to another polluter if it is not required

144
Q

Provision of information

A

When the government aims to inform consumers in order to correct market failure e.g. providing info on the benefits of merit goods/problems of consuming demerit goods perhaps via advertising campaigns or via the curriculum in schools. The government may also try to correct assymetric information in this way so that consumers have more power to make effective ones

145
Q

Regulation

A

Use of legal systems to place restrictions/basic standards on producers/consumers. Possible legal restrictions include a complete ban, requirement for a permit and compulsory consumption

146
Q

Property rights system

A

A system which grants ownership to third parties so that they have the right to sue those creating negative externalities for compensation in order to internalise the externality

147
Q

Minimum price

A

A price below which goods cannot be sold by law e.g. lowest price that one unit of alcohol can be sold

148
Q

Government failure

A

A market failure that is the result of state intervention

149
Q

Austerity

A

Economic policy aimed at reducing a government’s defecit. Austerity can be achieved through increases in government revenues or reducing expenditure

150
Q

Balanced budget

A

A budget in which government spending equals revenues

151
Q

Budget

A

A statement of a government’s spending and tax revenues for the next financial year

152
Q

Capital market

A

A stock or a bond market where firms can raise money for investment purposes

153
Q

Comparative advantage

A

The ability to produce a product at lower opportunity cost than other countries, regions, firms or people

154
Q

Cyclical trade defecit

A

A trade defecit which arises purely due to changes in the economy’s cycle, eg many countries run a defecit where their economy is growing strongly as increased AD sucks in imports

155
Q

Demand management policies

A

This refers to the range of monetary and fiscal policies to influence the AD for goods and services in an economy

156
Q

Deregulation

A

The removal of laws and regulations which restrict competition

157
Q

Developing countries

A

Countries generally lacking a high degree of industrialisation or other measures of development

158
Q

Dividends

A

A share on the profits of firms which is distributed by shareholders

159
Q

Domestic trade

A

The exchange of products within an economy

160
Q

Dumping

A

When a producer in one country exports a products to another country at a price below that which it charges in its home country or below the costs of supply

161
Q

Expectations

A

How we anticipate the future to unfold

162
Q

Fiscal stimulus

A

Government measures, normally involving increased public spending and lower tax, which is aimed at giving a jolt to the ecoomy

163
Q

Foreign direct investment

A

Investment from one country into another that involves establishing operations or acquiring tangible assets

164
Q

Free trade

A

When trade is allowed to occur without any form of restriction such as a tariff or quota

165
Q

Geographic mobility

A

The movement of economic resources from one area to another

166
Q

Golden rule

A

States that borrowing on state provided goods and services should be zero over the course of one economic cycle. Borrowing is allowed when it finances capital investment

167
Q

Hot money flows

A

Flows of short term finance that moves around the world to take advantage of differences in interest rates and possible exchange rate changes

168
Q

Household wealth

A

The value of the stock of assets including property, shares, savings and pension funds

169
Q

Immobility of labour

A

Barriers to the movement of people between areas (geographical) and jobs (occupational)

170
Q

Income distribution

A

The extent to which different groups of households share in the total income of the country

171
Q

Infrastructure

A

The transport links, communications networks, sewage systems, energy plants and other facilities neccessary for the efficient running of a country

172
Q

International trade

A

The exchange of goods or services across national boundaries

173
Q

Keynesian economists

A

Beleive that market failure is a significant problem and that government intervention can improve the situation

174
Q

Labour force survey

A

This measures unemployment based on the ILO’s definition of unemployment; those who are actively seeking work and are available to start work, whether or not they are claiming benefits

175
Q

Labour supply

A

The number of people able, available and willing to work at prevailing wages

176
Q

Means tested benefits

A

Benefits given to people assessed as needing assistance on the basis of their income

177
Q

Monetarists

A

People who believe that the only cause of inflation is the money supply growing faster than output

178
Q

Money supply

A

The entire quantity of a country’s commercial bills, coins, loans and credit

179
Q

Mortgages

A

Loans for house purchases

180
Q

Natural rate of unemployment

A

The rate of unemployment that exists when the labour market is in equilibrium

181
Q

Public sector net cash requirement

A

This is the amount that the government sector needs to borrow, over and above the tax revenue collected, to finance planned government spending in a given year. Includes borrowing by public corporations and local governments as well as central government

182
Q

Regional policy

A

Government measures designed to influence incomes, population and the number of firms in a particular area

183
Q

Regional unemployment

A

People who are willing and able to work but do not have work while there are job vacancies in another area

184
Q

Menu costs

A

Costs involved in having to change prices as a result of infation

185
Q

Shoe leather costs

A

Costs involved in moving money around during a period of inflation in a bid to maitain its real value and costs incurred in searching for a cheaper supplier

186
Q

Supply-side policies

A

Policies designed to increase the economy’s long term potential growth

187
Q

Sustainable economic growth

A

Economic growth achieved in a way that does not endanger the country’s ability to achieve economic growth in the future

188
Q

Tariff

A

Tax on imports

189
Q

Transfer payments

A

Money transferred from one group to another not in return for providing a good or service. Such payments can’t be included in calculating GDP

190
Q

Transmission mechanism

A

The process trough which monetary policy decisions affect the economy in general and the price level in particular. The transmission mechanism is characterised by long, variable and uncertain time lags. Thus it is difficult to predict the precise effect of monetary policy actions on the economy and price level

191
Q

Trend growth

A

The long term growth path of an economy. This is extrapolated from the preceding long term average

192
Q

Unemployment trap

A

A situation where some people are financially better off living on unemployment benefits than working

193
Q

Wealth distribution

A

The extent to which different groups of households share in the total wealth of the country

194
Q

Fiscal Stance

A

The planned level of government spending & taxation depending on the expectations and estimates of potential- rather than actual- economic growth

195
Q

Fine tuning

A

Maintenance of a steady rate of economic growth by making small changes to fiscal and/or monetary polic

AS Economics (13 decks)

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