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Economics > Definitions > Flashcards

Definitions Flashcards

1
Q

LABOUR

A

Mental or physical effort of humans rewarded by wages

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2
Q

CAPITAL

A

Anything that is man made & helps production rewarded by interest

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3
Q

LAND

A

All natural resources used in production

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4
Q

ENTERPRISE

A

A person who combines other 3 factors of production, makes business decisions, bears the risk & is rewarded by profit

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5
Q

ECONOMIC PROBLEM

A

Wants are unlimited, but resources are limited

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6
Q

OPPORTUNITY COST

A

Next best alternative given up when making a choice

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7
Q

PRODUCTION POSSIBILITY CURVE

A

Shows max output of 2 goods that can be produced when resources are fully and efficiently used

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8
Q

PRIVATE COST

A

Cost paid my producers or consumers of a product

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9
Q

EXTERNAL COST

A

Damage to a 3rd party that is not taken into account

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10
Q

SOCIAL COST

A

Private+External cost

Cost paid by whole society

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11
Q

PRIVATE BENEFITS

A

Benefits or gains to producers and consumers

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12
Q

EXTERNAL BENEFIT

A

Benefit to a 3rd party not taken into account by producer

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13
Q

DEMAND

A

Willingness and ability to buy a product

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14
Q

SUPPLY

A

Willingness and ability to sell a product

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15
Q

EQUILIBRIUM PRICE

A

Price where quantity demanded equal quantity supplied

No excess demand or supply

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16
Q

DISEQUILIBRIUM PRICE

A

Price where quantity demanded is NOT equal to quantity supplied
Results In surplus(excess supply)
OR shortage(excess demand)

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17
Q

PRICE ELASTICITY OF DEMAND

A

Responsiveness of quantity demanded to changes in price

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18
Q

INELASTIC DEMAND

A

A price change causes a smaller % change in quantity demanded

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19
Q

ELASTIC DEMAND

A

A price change that causes a larger % change in quantity demanded

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20
Q

PRICE ELASTICITY OF SUPPLY

A

Responsiveness of quantity supplied to changes in price

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21
Q

INELASTIC SUPPLY

A

When price changes by a certain %, quantity supplied will change by a smaller %

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22
Q

ELASTIC SUPPLY

A

When price changes by a certain %, quantity supplied will change by a larger %

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23
Q

REGULATIONS

A

Rules and laws imposed by government

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24
Q

SUBSIDY

A

Payment made by the government to firms to help reduce their costs of production and increase output level and decrease prices

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25
Q

TRADE UNION

A

An organization of workers that negotiates for better pay and safer working conditions for its members

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26
Q

SOLE TRADER

A

A business owned and controlled by one person

He/she has unlimited liability and gets all the profit

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27
Q

UNLIMITED LIABILITY

A

Owners must repay all business debts using their savings or selling their property

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28
Q

PUBLIC LIMITED COMPANY

A

A type of business that sells shares to the general public in the stock market
Raising high finance to expand

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29
Q

LIMITED LIABILITY

A

Owners are not responsible for business debts, if the business fails they lose funds invested into the business

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30
Q

COOPERATIVES

A

Is a type of business owned and controlled by its members for their mutual benefit, it has limited liability & each member has one vote

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31
Q

MULTINATIONAL COMPANY

A

Is a firm that operates in more than one country & its head office is in the country of origin

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32
Q

PRODUCTIVITY

A

Is output per input per unit of time

It’s a measure of efficiency for factors of production

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33
Q

LABOUR PRODUCTIVITY

A

Is output per worker per unit of time

Higher productivity reduces cost of production

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34
Q

FIXED COSTS

A

Cost is that don’t change with output

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35
Q

VARIABLE COST

A

Costs that change directly to output level

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36
Q

AVERAGE COST

A

Cost per unit= TC/output

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37
Q

REVENUE

A

Is income generated from sales=P x q

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38
Q

PROFIT MAXMIZATION

A

Means to achieve highest possible profit by increasing total revenue and decreasing total cost

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39
Q

BREAK-EVEN POINT

A

Output level where total revenue equals total cost

Zero profit

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40
Q

HORIZONTAL INTEGRATION

A

Occurs when 2 or more firms at the same stage of production combine together either by merger or takeover

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41
Q

VERTICAL INTEGRATION

A

Occurs when 2 or more firms at different stages of production merge together
Can be vertical backward > when a firm merges with previous stage(source of supply)
Can be vertical forward > when a firm merged with next stage (shop)

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42
Q

DIVERSIFICATION

A

“Conglomerate integration”

Occurs when 2 or more firms in unrelated industries merge to spread the risk of loss

43
Q

ECONOMIES OF SCALE

A

Reduction of average cost of firm as output increases

44
Q

DISECONOMIES OF SCALE

A

An increase In Average cost of a firm as output increases beyond a certain level

45
Q

EXTERNAL ECONOMIES OF SCALE

A

When a firm locates where other firms in the same industry are located so decreasing its cost of production

46
Q

COMPETITION

A

Is a market structure where a large number of producers, that sell homogeneous products

47
Q

PRICE TAKERS

A

Occurs in perfect competition, where firms take the price determined by demand & supply
No one firm has the power to affect market price

48
Q

MONOPOLY

A

Occurs when 1 firm dominates the market, it can restrict output to increase the price( price maker )

49
Q

PRICE MAKER

A

Occurs in monopoly where it can restrict the market supply, to change higher price for its product

50
Q

FULL EMPLOYMENT

A

One of the government macroeconomic aims
Means to reduce unemployment to the lowest possible level
Keeping it to seasonal or frictional unemployment

51
Q

REDISTRIBUTION OF INCOME

A

Means to reduce the gap between higher and lower income groups, using progressive tax & using tax revenue to subsidie basic necessities for the poor

52
Q

FISCAL POLICY

A

A policy that uses tax & government expenditure to influence economic activity and achieve macroeconomic aims

53
Q

MONETARY POLICY

A

A policy that uses interest rate, exchange rate or money supply to achieve macroeconomic aims

54
Q

SUPPLY SIDE POLICY

A

Is a long term policy aimed at increasing the productive capacity of a country by improving quality and quantity of factors of production

55
Q

TAX

A

Is a government levy on income or expenditure

56
Q

DIRECT TAX

A

Is a tax Imposed on income, wealth or profit of individuals or firms. The burden of tax can’t be shifted to someone else
Eg: Income tax , Corporation tax

57
Q

INDIRECT TAX

A

Tax imposed on expenditure on goods or services.
Burden of tax can be shifted to customer in the form of higher prices
Eg: VAT, tariff

58
Q

PROGRESSIVE TAX

A

As income increases tax rate (% )increases

59
Q

PROPORTIONAL TAX

A

Tax rate is same for all income levels

60
Q

REGRESSIVE TAX

A

Low income groups pay higher rate of tax

eg: sales tax

61
Q

BARTER

A

The act of exchanging goods for other goods or services

62
Q

MEDIUM OF EXCHANGE

A

Money is widely accepted as a means of payment for goods or services

63
Q

MEASURE OF VALUE

A

Money is a unit of account used to measure the market value of goods or services

64
Q

STORE OF VALUE

A

Money can be saved and used at a later date

65
Q

STANDARD FOR DEFERRED PAYMENT

A

Buy the product now and pay at a later date

(I.e) money is a standard for future payment of loans

66
Q

CENTRAL BANK

A

Monetary authority that manages a country’s money supply and banking system

67
Q

STOCK MARKET

A

Is an institutional market for trading shares of public limited countries

68
Q

INFLATION

A

Sustained rise in general price levels in an economy over time

69
Q

DEFLATION

A

Sustained decrease in general price levels in an economy over time

70
Q

UNEMPLOYMENT

A

People who are able to and willing to work, but can’t find a job

71
Q

GDP

A

(Gross domestic product)

Money value of goods and services produced within a country for a given period of time( usually a year)

72
Q

REAL GDP

A

Measures actual amount of goods and services produced within a country after excluding effect of inflation

73
Q

ECONOMIC GROWTH

A
  • An increase in a countries real GDP over a given period of time
  • Measured by rate of change in real GDP
  • Increase in productive capacity of an economy and shown by an outward shift in production productivity curve
74
Q

RECESSION

A

A fall in a countries GDP over 2 consecutive quarters

75
Q

GDP PER CAPITA( or per head)

A

Total output divided by population can be used as a measure for standard of living

76
Q

ABSOLUTE POVERTY

A

Exists when people lack income to buy basic necessities (food, clothes, shelter, etc.)
Calculated by the % of the population living below poverty line($1.9)a day

77
Q

RELATIVE POVERTY

A

Comparative measure, means individuals have lower standard of living in comparison with average member of society

78
Q

BIRTH RATE

A

Number of births per thousand population per year

79
Q

DEATH RATE

A

Number of deaths per thousand population per year

80
Q

FERTILITY RATE

A

Measures average number of children born per woman

81
Q

LIFE EXPECTANCY

A

Measures number of years an average person is expected to live

82
Q

DEPENDENCY RATIO

A

Measures the dependent population as a portion of work force

83
Q

UNDER POPULATED

A

The size of the population is less than the available resources. GDP per head can increase if population increases

84
Q

OVER POPULATION

A

The size of the population is more than the available resources. Any increase in the size of population leads to a fall in GDP per head

85
Q

SPECIALIZATION

A

Occurs when an individual, firm, region or country concentrate on a particular good point or service

86
Q

FREE TRADE

A

Trade without any form of trade barriers as tariff or quota

87
Q

TRADE PROTECTION

A

Refers to the use of trade barriers as tariffs or quotas to restrict imparts

88
Q

TARIFFS

A

A Tax imposed on imparts

89
Q

QUOTAS

A

An upper limit on the amount of imparts allowed inside a country

90
Q

EXCHANGE CONTROL

A

Means making foreign currency unavailable to domestic consumers and firms, so they are unable to buy goods or services

91
Q

EMBARGO

A

Banning trade within a certain country

92
Q

BALANCE OF PAYMENT

A

Is a financial record of a country’s transactions with the rest of the world in a year

93
Q

CURRENT ACCOUNT

A

Part of the balance of payments the include:

  • Visible balance( trade in goods)
  • Invisible balance(export and import of services)
  • Net income flow(includes inflow, outflow of profit, dividend and interest)
  • Current transfers(includes taxes and foreign aid)
94
Q

CURRENT ACCOUNT DEFICIT

A

Occurs when all debt items exceed all credit items in visible & invisible balance, net income flow and current transfers

95
Q

CURRENT ACCOUNT SURPLUS

A

Occurs when all credit items exceed all debit items in visible & invisible balance, net income flow, current transfers

96
Q

EXCHANGE RATE

A

Is the value of a country’s currency in terms of other countries

97
Q

FLOATING EXCHANGE RATE

A

Means the exchange rate is allowed to fluctuate according to forces of demand and supply without government interference

98
Q

FIXED EXCHANGE RATE

A

The exchange rate is not allowed to change according to forces of demand and supply but it is set by the government at a certain value

99
Q

APPRECIATION

A

A rise in a country’s currency in terms of other countries in a floating exchange rate

100
Q

DEPRECIATION

A

A fall in a country’s currency in terms of other countries in a floating exchange rate

101
Q

DEVALUATION

A

Is when the price of currency is officially decreased in a fixed exchange rate this is done by the government buying foreign currency and selling domestic currency

102
Q

REVALUATION

A

Is an official increase in the price in a currency in a fixed exchange rate This is done by the government by buying domestic currency and selling foreign currency to its citizens using foreign reserves in the central bank

103
Q

INVESTMENT

A

sp on capital

Economics (11 decks)

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