Definitions Flashcards
1
Q
Allocative efficiency
A
When economic resources are utilised to produce the combination of goods and services that maximise economic welfare.
2
Q
Allocative price function
A
Price allocates resources away from markets with excess supply to markets with excess demand
3
Q
Choice
A
Selecting one of multiple alternative when deciding how to allocate resources
4
Q
Consumer goods
A
Goods consumed by households and individuals used to satisfy needs and wants
5
Q
Economic welfare
A
The economic satisfaction / wellbeing of individuals households and groups in an economy
6
Q
FOP
A
Inputs of production process such as land labour capital and enterprise
7
Q
Finite resources
A
Non renewable resources that become increasingly scarce
8
Q
Fundamental economic problem
A
Deciding how best to allocate scarce resources to maximise overall economic welfare
9
Q
Imperfect information
A
When individuals lack the information to make the best decision
10
Q
Incentive price function
A
Price creates incentives for people to adjust their economic transactions
11
Q
Need
A
Something necessary for human survival eg food
12
Q
Normative statements
A
Statements including value judgements that cannot be easily proved/ disproved
13
Q
Opportunity cost
A
Loss of other alternatives due to selecting one of a set of options
14
Q
Positive statements
A
Statements including facts that can easily be proven / disproven
15
Q
PPF
A
A curve displaying the various possible combinations of two products that can be produced with finite resources
16
Q
Rationing price function
A
Prices rise to ration demand for goods
17
Q
Renewable resources
A
Restorable resources that can be replenished
18
Q
Scarcity
A
Resulting from the concept of infinite wants and needs yet limited resources
19
Q
Signalling price function
A
Prices provide information to sellers and buyers influencing economic decisions
20
Q
Trade
A
Buying and selling of goods and services 
21
Q
Want
A
Something desirable, yet not necessary for human survival
22
Q
Competing supply
A
When resources can be used to produce one good or another, good, not both
23
Q
Competitive markets
A
A market with large numbers of buyers and sellers with low barriers to entry and exit
24
Q
Complementary goods
A
Goods and joint demand, these goods are often bought together
25
Composite demand
Demand from multipurpose good
26
Condition of demand
A determinant of demand other than the goods price, that sets the position of the goods demand curve
27
Condition of supply
Determinant of supply, other than the good price, that sets the position of the goods supply curve
28
Cross elasticity of demand
 measures the responsiveness of a good demand to change in the price of a different good
29
Demand
The quantity of a good or service that a consumer is willing and able to buy at a given price at a given time
30
Derived demand
Demand for good, that is the input of another good
31
Disequilibrium
Excess supply or demand in a market
32
effective demand
Desire for a good or service that is backed by the ability to pay for said good or service
33
Elasticity
The proportionate responsiveness of a second variable to change in a first variable
34
Equilibrium
No excess supply or demand in a market, a state of balance between opposing forces
35
Equilibrium price
The price where planned demand matches planned supply
36
Excess demand
When consumers want to buy more than producers are willing to sell, occurs below equilibrium price
37
excess supply
When producers want to sell more than consumers are willing to buy occurs above equilibrium price
38
Exchange
Trading objects of value, utilising media of exchange, example, money
39
Income, elasticity of demand
Measures the responsiveness of a good demand to change in the incomes of consumers
40
Inferior good
A good for which demand rises as income falls
41
Joint supply
When one good is produced, another good is also produced from the same raw materials
42
Normal good
A good for which demand rises as income rises
43
Price elasticity of supply
Measure the responsiveness of a good supply to change in price
44
Substitute good
A good in competing demand, a good that can be used in place of another similar good
45
Supply
The quantity of a good or service that I producer is willing and able to sell at a given price at the given time
46
Average cost
Total production cost divided by total output (cost per unit of output)
47
Average revenue
Total revenue divided by total output (revenue per unit of output)
48
Capital productivity
Output per unit of capital
49
Diseconomies of scale
When long run average cost rise as output rises
50
Division of labour
Different workers performing different tasks in a good/service production, specialising to an extent
51
Economies of scale
When long run average costs fall as output rises
52
External economies of scale
Firms saving resulting from growth of the industry a firm is part of
53
Fixed cost
Costs of production that do not vary with output only in the short run
54
Internal economy of scale
Firms saving resulting from growth of the firm itself
55
Labour productivity
Output per worker
56
Long run
Time period in which none of the factors of production of fixed and all can be varied
57
Long run average cost
Long run, total cost per unit output
58
Long run production
When a firm changes, the scale of all factors of production
59
Production
A set of processes that converts inputs into outputs
60
Productive efficiency
Minimised average total cost
61
Productivity
Output per unit of input
62
Short run
Time period in which at least one of the factors of production are fixed and cannot be varied
63
Specialisation
A worker only performing a specific task or a small range of tasks
64
Technical economy of scale
Cost saving through changing the production process
65
Total cost
total fixed cost added to total variable cost
66
Total revenue
Price of each good multiplied by quantity sold
67
Variable cost
Costs incurred when paying for the variable factors of production
68
Artificial barriers to entry
Barriers to market entry that are man-made
69
Collusion
Illegal cooperation between multiple firms forming a cartel
70
Concentrated market
A market with very few in extreme cases, one firm
71
Concentration ratio
The total market share of the leading firms in an industry, these firms output as a percentage of the total output
72
Entry barrier
Making it impossible/more difficult for firms to enter a market
73
Exit barrier
Make it impossible/more difficult for firms to exit a market
74
Imperfect competition
Any market structure between the extremes of perfect competition and a pure monopoly
75
Innovation
Improving upon an existing product or process
76
Invention
Creating a new product or process
77
Limit pricing
Lowering the price of a good or service to around, average cost, creating an artificial barrier to entry
78
Market share maximisation
When a firm maximises their percentage share of the market, in which it sells their product
79
Market structure
The characteristics of a market
80
Monopoly power
The ability of a firm to be a price maker, rather than a price taker, the ability to set prices
81
Natural barriers to entry
Barriers to market entry that are not man-made
82
Natural monopoly
When the ideal number of firms in an industry is one
83
Oligopoly
The market dominated by a few firms
84
Patent
Government legislation protecting the firms right to be the sole producer of a good
85
Predatory pricing
Temporary, lowering a good price below, average cost, creating an artificial barrier to entry
86
Price competition
Reducing the price of a product, therefore stripping demand from competitors
87
Price maker
Affirm with monopoly power, the ability to set prices
88
Price taker
A firm that passively accepts the market price set by forces beyond the firms control
89
Product differentiation
Differences between multiple similar goods and services
90
Ignore
Ignora
91
Profit maximisation
Occurs where the positive difference between the total revenue and total cost is at its highest
92
Pure monopoly
Only one firm in a market
93
Sales maximisation
When sales revenue is at its highest
94
Administrative costs
Costs that are not directly related to a business operation example, paperwork
95
Asymmetric information
When one party knows more, or has better information than the other party in a transaction
96
Complete market failure
Occurs when the market is missing
97
Demerit good
A good reproduction or consumption has a negative impact on the consumer
98
Economic welfare
Quality of life of the population
99
Free rider problem
Once a public good is produced, there is no way to control who benefits from it
100
Government intervention
When a government actively intervenes and affects market operation
101
Immobility of factors of production
When it is hard for factors of production to move across different areas within the economy
102
Imperfect information
When an economic agent does not hold all the necessary information to make an informed decision about a product
103
Incentive?
Something that motivates an agent in the economy
104
Income inequality
Differences in size of earnings between household/individuals
105
Market distortions
Where interfering in a market affects behaviour and prices/output
106
Market economy
Where output and prices are determined by the workings of supply, and demand
107
Market failure
Where a market leads to a misallocation of resources
108
Merit good
A good were production or consumption creates external benefits
109
Missallocation of resources
Resources are not distributed optimally
110
Monopoly power
The ability of a firm to be a price maker, rather than a price taker, the ability to set prices
111
Negative externalities
Where external costs are passed onto third parties through consumption/production of a good
112
Non-excludable
A good or service where you are unable to prevent non-paying consumers from benefiting or using the good
113
Non-rival
Where one person consumption of a good or service does not decrease the amount available for consumption by another consumer
114
Partial market failure
This is where a market exists, but contributes to resource misallocation
115
Positive externality
Where a good has positive third-party effects when consumed or produced
116
Price controls
Government controls on prices, example, maximum or minimum price
117
Price mechanism
The way in which prices are determined through forces of supply and demand
118
Private benefit
Benefits incurred to the individual through consumption or production
119
Private cost
Costs incurred to the individual through consumption of production
120
Public goods
Good that benefit, and can be used by all members of society
121
Quasi public goods
Goods that have characteristics of both public and private goods
122
Rationing
Limiting the amount of quantity of a good available
123
Regulations
Laws or rules made by the government and other authorities
124
Signalling
Where a change in the price of goods or services that showed that supply or demand should be adjusted
125
Social benefits
The sum of private benefits and external benefits
126
Social cost
The sum of private costs an external costs
127
State provision
Where the government provides a good or service
128
Subsidies
Where the government gives money directly to firms, so that firms can continue production cheaper
129
Unintended consequences
Actions of people or governments that have consequences which were not anticipated
