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Economics - Micro > Definitions > Flashcards

Definitions Flashcards

1
Q

Allocative efficiency

A

When economic resources are utilised to produce the combination of goods and services that maximise economic welfare.

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2
Q

Allocative price function

A

Price allocates resources away from markets with excess supply to markets with excess demand

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3
Q

Choice

A

Selecting one of multiple alternative when deciding how to allocate resources

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4
Q

Consumer goods

A

Goods consumed by households and individuals used to satisfy needs and wants

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5
Q

Economic welfare

A

The economic satisfaction / wellbeing of individuals households and groups in an economy

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6
Q

FOP

A

Inputs of production process such as land labour capital and enterprise

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7
Q

Finite resources

A

Non renewable resources that become increasingly scarce

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8
Q

Fundamental economic problem

A

Deciding how best to allocate scarce resources to maximise overall economic welfare

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9
Q

Imperfect information

A

When individuals lack the information to make the best decision

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10
Q

Incentive price function

A

Price creates incentives for people to adjust their economic transactions

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11
Q

Need

A

Something necessary for human survival eg food

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12
Q

Normative statements

A

Statements including value judgements that cannot be easily proved/ disproved

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13
Q

Opportunity cost

A

Loss of other alternatives due to selecting one of a set of options

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14
Q

Positive statements

A

Statements including facts that can easily be proven / disproven

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15
Q

PPF

A

A curve displaying the various possible combinations of two products that can be produced with finite resources

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16
Q

Rationing price function

A

Prices rise to ration demand for goods

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17
Q

Renewable resources

A

Restorable resources that can be replenished

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18
Q

Scarcity

A

Resulting from the concept of infinite wants and needs yet limited resources

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19
Q

Signalling price function

A

Prices provide information to sellers and buyers influencing economic decisions

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20
Q

Trade

A

Buying and selling of goods and services 

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21
Q

Want

A

Something desirable, yet not necessary for human survival

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22
Q

Competing supply

A

When resources can be used to produce one good or another, good, not both

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23
Q

Competitive markets

A

A market with large numbers of buyers and sellers with low barriers to entry and exit

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24
Q

Complementary goods

A

Goods and joint demand, these goods are often bought together

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25
Q

Composite demand

A

Demand from multipurpose good

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26
Q

Condition of demand

A

A determinant of demand other than the goods price, that sets the position of the goods demand curve

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27
Q

Condition of supply

A

Determinant of supply, other than the good price, that sets the position of the goods supply curve

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28
Q

Cross elasticity of demand

A

 measures the responsiveness of a good demand to change in the price of a different good

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29
Q

Demand

A

The quantity of a good or service that a consumer is willing and able to buy at a given price at a given time

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30
Q

Derived demand

A

Demand for good, that is the input of another good

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31
Q

Disequilibrium

A

Excess supply or demand in a market

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32
Q

effective demand

A

Desire for a good or service that is backed by the ability to pay for said good or service

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33
Q

Elasticity

A

The proportionate responsiveness of a second variable to change in a first variable

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34
Q

Equilibrium

A

No excess supply or demand in a market, a state of balance between opposing forces

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35
Q

Equilibrium price

A

The price where planned demand matches planned supply

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36
Q

Excess demand

A

When consumers want to buy more than producers are willing to sell, occurs below equilibrium price

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37
Q

excess supply

A

When producers want to sell more than consumers are willing to buy occurs above equilibrium price

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38
Q

Exchange

A

Trading objects of value, utilising media of exchange, example, money

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39
Q

Income, elasticity of demand

A

Measures the responsiveness of a good demand to change in the incomes of consumers

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40
Q

Inferior good

A

A good for which demand rises as income falls

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41
Q

Joint supply

A

When one good is produced, another good is also produced from the same raw materials

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42
Q

Normal good

A

A good for which demand rises as income rises

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43
Q

Price elasticity of supply

A

Measure the responsiveness of a good supply to change in price

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44
Q

Substitute good

A

A good in competing demand, a good that can be used in place of another similar good

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45
Q

Supply

A

The quantity of a good or service that I producer is willing and able to sell at a given price at the given time

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46
Q

Average cost

A

Total production cost divided by total output (cost per unit of output)

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47
Q

Average revenue

A

Total revenue divided by total output (revenue per unit of output)

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48
Q

Capital productivity

A

Output per unit of capital

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49
Q

Diseconomies of scale

A

When long run average cost rise as output rises

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50
Q

Division of labour

A

Different workers performing different tasks in a good/service production, specialising to an extent

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51
Q

Economies of scale

A

When long run average costs fall as output rises

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52
Q

External economies of scale

A

Firms saving resulting from growth of the industry a firm is part of

53
Q

Fixed cost

A

Costs of production that do not vary with output only in the short run

54
Q

Internal economy of scale

A

Firms saving resulting from growth of the firm itself

55
Q

Labour productivity

A

Output per worker

56
Q

Long run

A

Time period in which none of the factors of production of fixed and all can be varied

57
Q

Long run average cost

A

Long run, total cost per unit output

58
Q

Long run production

A

When a firm changes, the scale of all factors of production

59
Q

Production

A

A set of processes that converts inputs into outputs

60
Q

Productive efficiency

A

Minimised average total cost

61
Q

Productivity

A

Output per unit of input

62
Q

Short run

A

Time period in which at least one of the factors of production are fixed and cannot be varied

63
Q

Specialisation

A

A worker only performing a specific task or a small range of tasks

64
Q

Technical economy of scale

A

Cost saving through changing the production process

65
Q

Total cost

A

total fixed cost added to total variable cost

66
Q

Total revenue

A

Price of each good multiplied by quantity sold

67
Q

Variable cost

A

Costs incurred when paying for the variable factors of production

68
Q

Artificial barriers to entry

A

Barriers to market entry that are man-made

69
Q

Collusion

A

Illegal cooperation between multiple firms forming a cartel

70
Q

Concentrated market

A

A market with very few in extreme cases, one firm

71
Q

Concentration ratio

A

The total market share of the leading firms in an industry, these firms output as a percentage of the total output

72
Q

Entry barrier

A

Making it impossible/more difficult for firms to enter a market

73
Q

Exit barrier

A

Make it impossible/more difficult for firms to exit a market

74
Q

Imperfect competition

A

Any market structure between the extremes of perfect competition and a pure monopoly

75
Q

Innovation

A

Improving upon an existing product or process

76
Q

Invention

A

Creating a new product or process

77
Q

Limit pricing

A

Lowering the price of a good or service to around, average cost, creating an artificial barrier to entry

78
Q

Market share maximisation

A

When a firm maximises their percentage share of the market, in which it sells their product

79
Q

Market structure

A

The characteristics of a market

80
Q

Monopoly power

A

The ability of a firm to be a price maker, rather than a price taker, the ability to set prices

81
Q

Natural barriers to entry

A

Barriers to market entry that are not man-made

82
Q

Natural monopoly

A

When the ideal number of firms in an industry is one

83
Q

Oligopoly

A

The market dominated by a few firms

84
Q

Patent

A

Government legislation protecting the firms right to be the sole producer of a good

85
Q

Predatory pricing

A

Temporary, lowering a good price below, average cost, creating an artificial barrier to entry

86
Q

Price competition

A

Reducing the price of a product, therefore stripping demand from competitors

87
Q

Price maker

A

Affirm with monopoly power, the ability to set prices

88
Q

Price taker

A

A firm that passively accepts the market price set by forces beyond the firms control

89
Q

Product differentiation

A

Differences between multiple similar goods and services

90
Q

Ignore

A

Ignora

91
Q

Profit maximisation

A

Occurs where the positive difference between the total revenue and total cost is at its highest

92
Q

Pure monopoly

A

Only one firm in a market

93
Q

Sales maximisation

A

When sales revenue is at its highest

94
Q

Administrative costs

A

Costs that are not directly related to a business operation example, paperwork

95
Q

Asymmetric information

A

When one party knows more, or has better information than the other party in a transaction

96
Q

Complete market failure

A

Occurs when the market is missing

97
Q

Demerit good

A

A good reproduction or consumption has a negative impact on the consumer

98
Q

Economic welfare

A

Quality of life of the population

99
Q

Free rider problem

A

Once a public good is produced, there is no way to control who benefits from it

100
Q

Government intervention

A

When a government actively intervenes and affects market operation

101
Q

Immobility of factors of production

A

When it is hard for factors of production to move across different areas within the economy

102
Q

Imperfect information

A

When an economic agent does not hold all the necessary information to make an informed decision about a product

103
Q

Incentive?

A

Something that motivates an agent in the economy

104
Q

Income inequality

A

Differences in size of earnings between household/individuals

105
Q

Market distortions

A

Where interfering in a market affects behaviour and prices/output

106
Q

Market economy

A

Where output and prices are determined by the workings of supply, and demand

107
Q

Market failure

A

Where a market leads to a misallocation of resources

108
Q

Merit good

A

A good were production or consumption creates external benefits

109
Q

Missallocation of resources

A

Resources are not distributed optimally

110
Q

Monopoly power

A

The ability of a firm to be a price maker, rather than a price taker, the ability to set prices

111
Q

Negative externalities

A

Where external costs are passed onto third parties through consumption/production of a good

112
Q

Non-excludable

A

A good or service where you are unable to prevent non-paying consumers from benefiting or using the good

113
Q

Non-rival

A

Where one person consumption of a good or service does not decrease the amount available for consumption by another consumer

114
Q

Partial market failure

A

This is where a market exists, but contributes to resource misallocation

115
Q

Positive externality

A

Where a good has positive third-party effects when consumed or produced

116
Q

Price controls

A

Government controls on prices, example, maximum or minimum price

117
Q

Price mechanism

A

The way in which prices are determined through forces of supply and demand

118
Q

Private benefit

A

Benefits incurred to the individual through consumption or production

119
Q

Private cost

A

Costs incurred to the individual through consumption of production

120
Q

Public goods

A

Good that benefit, and can be used by all members of society

121
Q

Quasi public goods

A

Goods that have characteristics of both public and private goods

122
Q

Rationing

A

Limiting the amount of quantity of a good available

123
Q

Regulations

A

Laws or rules made by the government and other authorities

124
Q

Signalling

A

Where a change in the price of goods or services that showed that supply or demand should be adjusted

125
Q

Social benefits

A

The sum of private benefits and external benefits

126
Q

Social cost

A

The sum of private costs an external costs

127
Q

State provision

A

Where the government provides a good or service

128
Q

Subsidies

A

Where the government gives money directly to firms, so that firms can continue production cheaper

129
Q

Unintended consequences

A

Actions of people or governments that have consequences which were not anticipated

Economics - Micro (6 decks)

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