Booklet 1 Flashcards
What term describes the allocation of resources that maximises consumer welfare - associated with a price equal to marginal cost?
Allocative efficiency.
What is the phrase describing the problem of unlimited human wants and limited resources with competing uses, making those resources scarce.
The basic economic problem
What factor of production is a man-made aid to production?
(Physical) Capital
What phrase means “All other things being equal”?
Ceteris Paribus
What are goods purchased by households that can be used more than once called?
Consumer durable goods
What are good purchased by households that can only be used once called?
Consumer non-durable goods
What is the phrase used to describe how a rational agent will weight costs and benefits of a decision and only follow a course of action where the benefits are at least equal to the costs?
The cost-benefit principle
What is breaking down a process into constituent parts and allowing workers to specialise on one or more of these parts to increase productivity called?
The division of labour
What is becoming more (productively) efficient over time, usually as a result of investment called?
Dynamic efficiency
What term is usually defined as the allocation of scarce resources?
Economics
What is bringing together the other three factors of production to decide what to produce and how, in doing so taking a (financial) risk called?
Enterprise
What means that something is deemed fair and requires a value judgement on the part of the observer? Not to be confused with equality.
Equitable
What is an economic system in which resource allocation is left to market forces?
Free-market economy
What is the human input into the production process, done by workers, whether mental, physical or managerial?
Labour
What is any natural resource found on, in or under the land?
Land
What is an economic system in which resource allocation is done partly by the government and partly by the interaction of market forces?
Mixed economy
What is a statement based on a value judgment or opinion?
A normative statment
What is the benefit forgone from the next best alternative called?
Opportunity cost
What is a situation where nobody can be made any better off without somebody else being made worse off?
Pareto optimum
What is an economic system in which the government is responsible for resource allocation rather than market forces?
Planned economy
What is an objective statement that is capable of being tested/verified called?
A positive statement
What is the conversion of factor inputs into outputs called?
Production
What is a graphical representation of all of the maximum combinations of two outputs that an economy can produce, given it’s initial factor endowment, current productivity can the current state of technology?
A production possibility frontier
What is the amount of output produced per unit of an input (such as labour)?
Productivity
What is producing at lowest possible average cost (requires technical efficiency) called?
Productive efficiency
Who is someone who acts rationally to maximise their own welfare?
A rational utility-maximiser
What means that there is not enough of a resource to satisfy all of the competing demands for it’s use?
Scarcity
What is buying the time or skill of another called?
Services
What is the use of scientific methods to study social phenomena called?
Social science
What is focusing on one area of production called?
Specialisation
What is being (allocatively or productively) efficient at a given moment in time called?
Static efficiency
What is producing the maximum possible amount of output from a given level of inputs (or producing a given level of output from the least possible inputs) called?
Technical efficiency.
What is a situation where an improvement in one variable leads to a deterioration of another?
A trade-off
What is the benefit gained from the consumption of a good or service called?
Utility
What is the difference between technical efficiency and the performance of a firm that has little incentive to reduce unit costs in pursuit of profit, usually because they have price-setting ability?
X-inefficiency
Why might people not always maximise their utility?
Gut decisions and habit
Mental health
Long run Vs Short run
Moral, political or religious viewpoints
Lack of information
Other people’s utility and altruism
Other people’s utility and altruism
