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Economics AQA A-LEVEL > CGP > Flashcards

CGP Flashcards

1
Q

Absolute advantage

A

A country will have an absolute advantage when its output of a product is greater per unit of resource used than any other country

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2
Q

Absolute poverty

A

This is when someone doesn’t have the income or wealth to meet their basic needs, such as food, shelter and water

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3
Q

Accelerator process

A

This is where any change in demand for goods/services beyond current capacity will lead to a greater percentage increase in the demand For the capital goods that firms need to produce these goods/services

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4
Q

Aggregate demand

A

The total demand or total spending, in an economy at a given price level over a given period of time. It’s made of consumption, investment, government spending and net exports

AD=C+I+G+(X-M)

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5
Q

Aggregate supply

A

The total amount of goods and services which can be supplied in and economy at a given price level over a given period of time.

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6
Q

Aid

A

The transfer resources from one country to another

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7
Q

Allocative efficiency

A

This is when the price of a good is equal to the price the consumers are happy to pay for it this will happen when all resources are allocated efficiently

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8
Q

Asymmetric information

A

This is when buyers have more information on sellers (or the opposite) on the market

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9
Q

Automatic stabilisers

A

These are parts of fiscal policies that will automatically react to changes in the economic cycle. For examples, during recession, government spending is likely to increase because the government will automatically pay out more unemployment benefits, which may reduce the problems recession causes

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10
Q

Average cost

A

The cost of production per unit of output – I.E. a firms total cost for a given period of time, divided by the quantity produced.

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11
Q

Average revenue

A

The revenue per unit sold – I.E. a firms total revenue for a given period of time, divided by the quantity sold

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12
Q

Balance of Payments

A

A record of the countries international transactions, I.E. flows of money into and out of the country

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13
Q

Bank rate

A

The official rate of interest set by the monetary policy committee of the Bank of England

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14
Q

Barriers to entry

A

Barriers to entry are any potential difficulties that may make it hard for a firm to enter the market

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15
Q

Barriers to exit

A

Barriers to exit or any potential difficulties that may make it hard for a firm to leave the market

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16
Q

Black Market

A

Economic activity that occurs without taxation and government regulation. Also called the informal market

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17
Q

Budget deficit

A

When government spending is greater than its revenue

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18
Q

Budget surplus

A

When government spending is less than its revenue

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19
Q

Capital account on the balance of payments

A

A part of the record of the countries international flows of money. This includes transfers of non-monetary and fixed assets, such as through Emigration and immigration

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20
Q

Cartel

A

A group of producers that agree to limit production in order to keep the price of a good or service high

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21
Q

Central bank

A

The institution responsible for issuing a countries banknotes, acting as a lender of last resort for other banks, and implementing monetary policy ( E.G.setting interest rates)

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22
Q

Circular flow of income

A

The flow of national output, income and expenditure between households and firms

National output = national income = national expenditure

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23
Q

Command economy

A

An economy where governments, not market, determine how to allocate resources

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24
Q

Comparative advantage

A

A country has a comparative advantage if the opportunity cost of producing a good is lower than the opportunity cost for other countries

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25
Q

Competition policy

A

Government policy aimed at reducing monopoly power in order to increase efficiency and ensure fairness for consumers

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26
Q

Concentration ratio

A

This shows how dominant firms are in the market, he.G.if three firms in the market have 90% market share then the three firm concentration ratio is 90%

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27
Q

Conglomerate integration

A

Mergers or takeovers between firms which operate in completely different markets

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28
Q

Consumer surplus

A

When a consumer pays less for a good then they were prepared to, this difference is the consumer surplus

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29
Q

Consumption

A

The purchase/use of goods or services

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30
Q

Contestability

A

In market is contestable if it’s easy for new firms to enter the market I.E.if barriers to entry are low

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31
Q

Cost benefit analysis (CBA)

A

This involves adding up the total private and external costs and benefits of a major project in order to decide if the project should go ahead.

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32
Q

Cost push inflation

A

Inflation caused by the rising cost of inputs to production

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33
Q

Creative destruction

A

This occurs when the innovation and invention of new products and production methods cause the destruction of existing markets and create new ones

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34
Q

Cross elasticities of demand (XED)

A

This is a measure of how the quantity demanded of one good/service response to a change in the price of a another good/service

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35
Q

Count account on the balance of payments

A

A part of the record of a countries international flows of money. They consist of: trade in goods, trading services, international flows of income (salaries, interest, profit and dividends), and transfers

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36
Q

Cyclical unemployment

A

Unemployment caused by a shortage of demand in an economy, E.G. When there is a slump

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37
Q

Demand pull inflation

A

Inflation caused by excessive growth in an aggregate demand compare to the aggregate supply

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38
Q

Demerger

A

If firm selling off part(S) of its business to create a separate firm or firms

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39
Q

Demerit good

A

A good or service which has greater social cost when it consumed in private costs. Demerit goods tend to be over consumed

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40
Q

Dependency ratio

A

How many people are either too young or too old to work, relative to the number of people of working age

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41
Q

Deregulation

A

Removing rules imposed by government that can restrict the level of competition in the market

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42
Q

Derived demand

A

The mind of a good or factor of production due to its use in making another good or providing a service

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43
Q

Developed countries

A

Relatively rich, industrialised countries with a high GDP per capita

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44
Q

Diseconomies of scale

A

A firm is experiencing this diseconomies of scale when the average cost of production is rising as output rises

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45
Q

Disposable income

A

Income, including welfare benefits, that is available for households to spend after income tax has been paid.

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46
Q

Dividend

A

And share in the firms profits that is given to firms shareholders

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47
Q

Divorce of ownership from control

Principal- Agent Problem

A

This occurs when a firms owners on no longer in control of the day-to-day running of the firm (E.G.because it’s run by directors). This can lead to the principal agent problem, where those in control act in their own self interest, rather than the interest of the owners.

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48
Q

Dynamic efficiency

A

This is about firms improving efficiency in the long term by carrying out research and development into new or improved products, or investing in new technology and training to improve the production process. The comparison of two snapshot

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49
Q

Economic cycle

A

The economic cycle is the fluctuations in actual growth over a period of time (several years or decades)

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50
Q

Economic development

A

An assessment of living standards and peoples overall welfare in the country

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51
Q

Economic growth

A

An increase in economy’s productive potential. Usually measured as the rate of change of the gross domestic product (GDP), or the GDP per capita

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52
Q

Economic integration

A

The process by which the economies of different countries become more closely linked, E.G.through free trade agreements

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53
Q

Economic rent

A

The access a worker is paid above the minimum required to keep them in the current occupation (this minimum payment is the transfer earnings)

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54
Q

Economically active population

A

The people in economy who are capable of and old enough to work

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55
Q

Economies of scale

A

If firm is experiencing economies of scale when the average cost of production is falling as output rises

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56
Q

Emerging countries

A

Countries which are not yet developed, but which are growing quickly and are further along the development process and other developing countries

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57
Q

Equilibrium

A

A market for a product is in equilibrium with the quantity supplied is equal to the quantity demanded

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58
Q

Equity

A

This means Fairness.

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59
Q

Exchange rate

A

The price at which one currency buys another

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60
Q

Extending property rights

A

When property rights over a resaws a given to an individual or firm. This gives them control over the usage of that resource

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61
Q

External growth

A

Affirm going through mergers/takeovers

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62
Q

Externalities

A

The external costs or benefits to a third party that is not involved in the making, buying/selling and consumption of a specific good/service

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63
Q

Factors of production

A

These are the four inputs needed to meet the things that people want they are: land, labour, capital and enterprise

64
Q

Financial account on the balance of payments

A

A part of the record of the countries international flows of money. This involves the movement of financial assets (E.G.through a foreign direct investment FDI)

65
Q

Financial sector

A

Firms to provide financial services (E.G.banks and insurance companies)

66
Q

Fiscal policy

A

Government policy that determines the level of government spending and taxation. Often used to increase or decrease aggregate demand in an economy

67
Q

Fishers equation of exchange

A

See quantity theory of money

68
Q

Fixed costs

A

Course the duvet with the level of output of a firm in the short run

69
Q

Foreign direct investment (FDI)

A

This is when a firm based in one country makes an investment in a different country

70
Q

Freemarket

A

A market where there is no government intervention. Competition between different suppliers affect supply and demand, and as a result determines prices.

71
Q

Free rider problem

A

This means that once a public good is provided it’s impossible to stop someone from benefitting from it , even if they haven’t paid towards it

72
Q

Free trade

A

International trade without any restrictions from things such as trade barriers

73
Q

Frictional unemployment

A

The unemployment experience by workers between leaving one job and starting another

74
Q

Full employment

A

The situation where everyone of working age who wants a job at the Current wage can get one

75
Q

Globalisation

A

The increasing integration of economies internationally, which is making the world more like a single economy

76
Q

Government Failure

A

This occurs when government intervention into the market causes a miss allocation of resources

77
Q

Gross domestic product (GDP)

A

The total value of all goods and services produced in the country in a year

78
Q

Hit and run tactics

A

This is one fund and your market while supernormal profit can be made and then leave the market when the prices have been driven down to normal profit levels

79
Q

Horizontal equity

A

This means that people in identical circumstances are treated fairly

80
Q

Horizontal integration

A

Mergers or takeovers between firms that are at the same stage of the production process of similar products

81
Q

Human capital

A

Economic value of a person skills

82
Q

Human development index (HDI)

A

A measure of the countries economic development, used by the UN, that combines measures of health (life expectancy), education (average and expected years in school), and the standard living (real GNI per capita).

83
Q

Imperfect information

A

A situation where buyers and/or sellers don’t have full knowledge regarding prices, costs, benefits and availability of a good or service

84
Q

Income

A

Money that a firm or person receives from providing a good or service

85
Q

Income elasticities of demand (YED)

A

This is a measure of how the demand for a good/service response to a change in real income

86
Q

Inequity

A

Another word for unfairness

87
Q

Inflation

A

This is persistent rise in the average price of goods and services over a period of time.

88
Q

Infrastructure

A

The basic facilities and services needed for the country and it economy to function

89
Q

Inorganic growth

A

See external growth

90
Q

Interest

A

The money paid to the lender by someone who borrows capital. This will often be a fixed percentage ratio – known as an interest rate

91
Q

Internal growth

A

A firm growing as a result of increasing the levels of the factors of production of users, rather than through mergers or takeovers

92
Q

Investment

A

The purchase of capital, such as new machinery, in the hope that this will help generate an increased level of output. Investment can also mean buying shares from stock market – this is done in the hope of making a future profit or receiving dividend payments

93
Q

Labour immobility

A

This occurs when Labour can’t easily move around to find jobs (geographically immobility) or easily switch between different occupations (occupational immobility)

94
Q

Laws of diminishing returns

A

The idea that if a firm increases one variable factor of production while other factors stay fixed, then the marginal returns the firm get from the variable factor will always eventually begin to decrease

95
Q

Liquidity

A

How easily an asset can be spent, converted to money,

96
Q

Long run

A

A time period in which all the facts the production of able, so a firm can expand its capacity

97
Q

Long run aggregate supply

A

In the long run it’s assumed that because factors and costs of production can change, an economy will run at full capacity - so LRAS is the productive potential of an economy

98
Q

Marginal product

A

The extra output that is produced when a firm add one more unit of one of the factors of production they are using

99
Q

Marginal cost

A

The cost of a firm of producing the final unit of output

100
Q

Marginal propensity to consume

A

The proportion of an increase in income that people will spend (and not save)

101
Q

Marginal returns

A

See marginal product

102
Q

Marginal revenue

A

The extra revenue received as a result of selling one more unit of output

103
Q

Marginal tax rate

A

Rate at which you pay on any ‘extra’ Money you receive

104
Q

Marginal utility

A

The benefit of consuming one extra unit of a good

105
Q

Market failure

A

This is where the price mechanism fails to allocate resources efficiently

106
Q

Merger

A

Two firms uniting to form a new company

107
Q

Minimum efficient scale of production (MES)

A

The lowest level of output at which a firm can achieve the lowest possible average cost of production

108
Q

Monetary policy

A

Government policy that involves controlling the total amount of ‘money’ in an economy (the money supply), and how expensive it is to borrow that money. It involves manipulating interest rate, exchange rate and restrictions on the supply of money.

109
Q

Monopoly

A

If your monopoly is the market where only one supplier occurs. Some markets will be referred to as a monopoly if there’s more than one supplier, but one supplier dominates the market

110
Q

Monopoly power

A

The ability of a firm to be a price maker and influence the price of a particular good in the market

111
Q

Monopsony

A

A market with a single buyer

112
Q

Multi national corporations

A

Firms which function in at least one other country, aside from their country of origin

113
Q

Multiplier effect

A

The process by which an injection into the circular flow of income create a change in the size of national income that’s greater than the injections size

114
Q

National debt

A

The total debt that the country has run up over time

115
Q

National minimum wage

A

A legal minimum hourly rate of pay, set for different age groups. There is a national minimum wage in the UK

116
Q

National output

A

The total goods and services produced in a country in the year

117
Q

Nationalised industry

A

An industry owned by the government

118
Q

Natural Monopoly

A

An industry where economies of scale are so great that the lowest long run average cost can only be achieved if the market is made up of a single provider

119
Q

Natural Rate of Unemployment (NRU)

A

The rate of unemployment when the labour market is in equilibrium (I.E when labour demands is equal to labour supply).

120
Q

Non-Pure public good

A

See quasi-public good

121
Q

Normal Profit

A

A firm is making normal profit when its total revenue=total cost

122
Q

Oligopoly

A

A market is dominated by a few large firms that offer differentiated products, with high barriers to entry. The firms are interdependent

123
Q

Opportunity Cost

A

The benefit thats given up in order to do something else- its the cost of the choice that’s made.

124
Q

Organic Growth

A

See Internal Growth

125
Q

Output Gap

A

The gap between the trend rate of economic growth and actual economic growth. Output gaps can be +ve or -ve

126
Q

Participation rate

A

There proportion of working age people in the economy that are either in work or actively seeking work.

127
Q

Perfect Information

A

When buyers and sellers have full knowledge of prices, costs, benefits and availability of products

128
Q

Phillips Curve (LR)

A

Curve that shows the relation ship between inflation and unemployment in the LR - always vertical line, positioned at NRU

129
Q

Phillips Curve (SR)

A

Curve that shows relationship between inflation and unemployment in the SR - as the level of one falls, the levels of the other rises

130
Q

Predatory Pricing

A

An aggressive pricing tactic which involves incumbent firms in a market are lowering their prices to a level that a new entrant to the market can’t match, in order to force them out of the market

131
Q

Price Cap

A

A limit on price rises that makes a market fairer to consumers. it provides an incentive for firms to increase efficiency. Two common price caps are: RPI -X and RPI -X+K

132
Q

Price Discrimination

A

Occurs when a seller charges different prices to different customers for exactly the same product.

133
Q

PED

A

a measure to show how quantity demanded of a good/service responds to a change in its price

134
Q

PES

A

a measure to show how quantity supplied of a good/service responds to a change in its price

135
Q

Price Maker

A

A firm that has some power to control the price it sells at.

136
Q

Price Mechanism

A

This is when changes in the demand or supply of a good/service lead to changes in its price and the quantity brought/sold

137
Q

Price Taker

A

A firm that has no power to control the price it sells at - it has to accept the market price.

138
Q

Price War

A

A situation where one firm in a market lowers their prices, and other firms follow suit, triggering a series of price cuts as firms try to undercut one another

139
Q

Privatisation

A

When a firm or a whole industry changes from being run by the public sector to the private sector.

140
Q

Producer Surplus

A

When a producer receives more for a good than they were prepared to accept, this difference is the producer surplus.

141
Q

Productive Efficiency

A

This occurs when products are produced at a level of output where the AC is lowest MC=AC

142
Q

Productivity

A

The average output produced per unit of a factor of production - for example, labour productivity id the average output per worker

143
Q

Profit

A

total revenue - total costs

144
Q

Progressive taxation

A

a tax system where an individual’s tax rises (as a % of their income) as their income rises

145
Q

Proportional Taxation

A

a tax system where everyone pays the same proportion of tax regardless of their income

146
Q

Protectionism

A

When a government uses policies to control the level of international trade and protect its own economy, industries and firms.

147
Q

Public Good

A

A good which can’t be stopped from consuming, even if they haven’t paid for it, and the consumption of which doesn’t prevent others from benefitting from it.

148
Q

Public Sector

A

The part of the economy that is owned or run by the government

149
Q

PPP (purchasing power parity)

A

An adjustment of an exchange rate to reflect the real purchasing power of the two countries

150
Q

QE (quantitative easing)

A

this involves the central bank (BoE) ‘creating new money’ and using it to buy assets owned by financial institutions and other firms. It increases the money supply, which will enable individuals and firms to spend more, or lend it to other people to spend.

151
Q

QT (quantitative tightening)

A

“the Fed will let the old bonds mature, and not buy new ones. That way the money just disappears and the balance sheet shrinks. The new name for this is “quantitative tightening,” or QT.”

152
Q

Quantity theory of money

A

Theory is based on the idea that changes in the money supply will cause changes to the price level use the formula: MV = PT which is known as fishers equation of exchange

153
Q

Quasi – public good

A

Are good which appears to have the characteristics of a public good that doesn’t exhibit them fully

154
Q

Quota

A

A limit on the amount of a good that is allowed to be used, produced or imported

155
Q

Real income

A

A measure of the amount of goods/services that consumers can afford to purchase with the income, adjusted with inflation

Economics AQA A-LEVEL (1 decks)

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