Deck 2 (D-G)

Question 1

Demand

Answer 1

The quantity of a good or service that consumers are willing and able to to buy at any possible price in a given time period

Question 2

Demand curve

Answer 2

A graph showing how much of a good will be demanded by consumers at any given price

Question 3

Demerit good

Answer 3

A good that brings less benefit to consumers than they expect, such that too much will be consumed by individuals in a free market

Question 4

Derived demand

Answer 4

Demand for a factor of production which derives not from the factor itself, but from the goods it produces

Question 5

Division of labour

Answer 5

A process whereby the production procedure is broken down into a sequence of stages, and workers are assigned to particular stages

Question 6

Economic efficiency

Answer 6

A situation in which both productive and allocative efficiency have been reached

Question 7

Economies of scale

Answer 7

Occur when a firm increases the scale of its production leading to a reduction in the long-run average cost

Question 8

Elasticity

Answer 8

A measure of the sensitivity of one variable to changes in another variable

Question 9

Excess burden of a sales tax

Answer 9

The deadweight loss to society following the imposition of a sales tax

Question 10

External cost

Answer 10

A cost that is associated with an individual’s (a firm or household’s) production or other economic activities, which is borne by a third party

Question 11

Externality

Answer 11

A cost or a benefit that is external to the market transaction, and is thus not reflected in market prices

Question 12

Factors of production

Answer 12

Resources used in the production process; inputs into production - capital, entrepreneurship, land and labour

Question 13

Firm

Answer 13

An organisation that brings together factors of production in order to produce output

Question 14

Fixed costs

Answer 14

Costs incurred by a firm that do not vary with output

Question 15

Free market economy

Answer 15

An economy in which resource allocation is guided by market forces without intervention from the state

Question 16

Free-rider problem

Answer 16

When an individual cannot be excluded from consuming a good, and thus has no incentive to pay for its provision

Question 17

Government failure

Answer 17

A misallocation of resources arising from government intervention

Question 18

Equilibrium price

Answer 18

The price where demand and supply are equal, the market clears

Question 19

Disequilibrium

Answer 19

Any position in the market where demand and supply are not equal