Deck 1 (A-C)

Question 1

Ad valorem tax

Answer 1

A tax levied on a commodity set as a percentage of the selling price

Question 2

Adverse selection

Answer 2

A situation in which a person at risk is more likely to take out insurance

Question 3

Allocative efficiency

Answer 3

Achieved when consumer satisfaction is maximised

Question 4

Asymmetric information

Answer 4

A situation in which some participants in a market have far better information about market conditions than others

Question 5

Average total cost (ATC)

Answer 5

Total cost divided by the quantity produced

Question 6

Buffer stock

Answer 6

A scheme intended to stabilise the price of a commodity by buying excess supply in periods when supply is high, and selling when supply is low

Question 7

Capitalism

Answer 7

A system of production in which there is private ownership of productive resources, and individuals are free to pursue their objectives with minimal interference form government

Question 8

Centrally planned economy

Answer 8

Decisions on resource allocation are guided by the state

Question 9

Ceteris paribus

Answer 9

‘Other things being equal’ - used in economics when focus is on one variable while holding all other variables constant

Question 10

Comparative static analysis

Answer 10

Examines the effect on equilibrium of a change in the external conditions affecting a market

Question 11

Competitive demand

Answer 11

Demand for goods that are in competition with each other

Question 12

Competitive market

Answer 12

A market in which individual firms cannot influence the price of the good or service they are selling due to competition from other firms

Question 13

Competitive supply

Answer 13

A situation in which a firm can use its factors of production to produce alternative products

Question 14

Complements

Answer 14

Two goods that are usually consumed jointly, so that an increase in the price of one good causes the demand for the other to fall

Question 15

Composite demand

Answer 15

Demand for a good that has multiple uses

Question 16

Composite supply

Answer 16

Where a product produced by a firm serves more than one market

Question 17

Consumer surplus

Answer 17

The value that consumers gain from consuming a good or service over and above the price paid

Question 18

Consumption externality

Answer 18

An externality that affects the consumption side of the market, can be positive or negative

Question 19

Cost efficiency

Answer 19

The appropriate combination of inputs of factors of production, given the relative prices of those factors

Question 20

Cross elasticity of demand (XED)

Answer 20

A measure of the sensitivity of quantity demanded of a good or service to a change in the price of some other good or service