December Mock Revision Flashcards
Normative Statement
An Opinion
Positive Statement
A Fact
The Basic Economic Problem
Scarce Resources, Unlimited Wants
Opportunity Cost
the loss of other alternatives when one alternative is chosen.
Allocatively Efficient
The point on the PPF diagram where the point is on the line
Productively Efficient
The point on the PPF line where producing goods are at its lowest cost.
Utility
the amount of satisfaction or benefit that a consumer gains from consuming a good or service.
Marginal Utility
the satisfaction gained form consuming an additional unit of a good.
Diminishing marginal utility
Additional units give successively smaller increases in total satisfaction.
Neoclassical assumptions
Rational Consumer Behaviour
Imperfect information
makes it difficult for economic agents to make rational
decisions and is a potential source of market failure.
Bounded rationality
try to act rationally but their ability to do so is severely restricted.
Bounded self-control
Individuals have good intentions but lack the self-discipline to see them through.
Predictably irrational
Because of bounded rationality and bounded self-control people are predictably irrational.
Asymmetric information
A form of imperfect information when one party (usually the seller) has more/superior information than another (usually the buyer)
PED
% change in quanity
/
% change in price
PES
% change in supply
/
% change in price
YED
% change in demand
/
% change in supply
XED
% change demand of good A
/
% change in price of good B
Joint Demand
Where two or more commodities or services are demanded together
Joint Supply
Product or process that can yield two or more outputs
Composite Demand
Where goods have more than one use.where goods have more than one use.
Derived Demand
derived demand is demand for a factor of production or good that occurs as a result of the demand for another intermediate or final good.
Diminishing Returns
As more of a variable factor (e.g. labour) is added to a fixed factor (e.g. capital), a firm will reach a point where it has a disproportionate quantity of labour to capital and so the marginal product of labour will fall, thus raising marginal costs.
