Deck 4 (N-Z) Flashcards
Normal good
One where the quantity demanded increases in response to an increase in consumer incomes
Normative statement
A statement involving a value judgement that is about what ought to be
Opportunity cost
In decision making, it is the value of the next-best alternative forgone
Pareto optimum
When no reallocation of resources can make an individual better off without making some other individual worse off
Positive statement
A statement about what is, i.e. about facts
Price elasticity of demand (PED)
A measure of the sensitivity of quantity demanded to a change in price of a good or service
Price elasticity of supply (PES)
A measure of the sensitivity of quantity supplied of a good or service to a change in the price of that good or service
Private cost
A cost incurred by an individual (firm or consumer) as part of its production or other economic activities
Private good
A good that, once consumed by one person, cannot be consumed by someone else - it has excludability and is rivalrous
Producer surplus
The difference between the price received by firms for a good or service and the price they would have been prepared to supply that good or service
Production externality
An externality that affects the production side of a market, which may be either positive or negative
Production possibility curve
A curve showing the maximum combinations of goods and services that can be produced in a set period of time given the available resources
Productive efficiency
Attained when a firm operates at the lowest average total cost
Prohibition
An attempt to prevent the consumption of a demerit good by declaring it illegal
Public good
A good that is non-exclusive and non-rivalrous - a person cannot be excluded from consuming the good and one person’s consumption does not affect the amount available for others to consumer
Quasi-public good
Goods that have some, but not all the characteristics of a public good
Scarcity
A situation that arises because people have unlimited wants in the face of limited resources
Specific tax
A tax of a fixed amount imposed on purchases of a commodity
Subsidy
A grant given by the government to producers to encourage production of a good or service
Substitutes
When goods are regarded by consumers as alternatives, demand for one good is likely to rise if the price of the alternative rises
Sunk costs
Cost incurred by a firm that cannot be recovered if the firm ceases trading
Superior good
One for which the income elasticity of demand is positive, and greater than 1, such that as income rises, consumers spend proportionally more on the good
Supply curve
A graph showing the quantity supplied at any given price
Technical efficiency
Attaining the maximum possible output from a given set of inputs
Total cost (TC)
The sum of all costs that are incurred in producing a given level of output
Variable costs
Costs that vary with the level of output
Polluter pays principle
Any measure whereby the polluter pays explicitly for the pollution caused
Third party
Those not directly involved in making a decision
