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Economics > Definitions > Flashcards

Definitions Flashcards

0
Q

Scarcity

A

A situation where there are insufficient resources to meet all wants

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1
Q

Economic Problem

A

how to allocate scarce resources among alternative uses

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2
Q

Land

A

The natural resources available in an economy, e.g fish

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3
Q

Labour

A

The quantity and quality of human resources- training, education

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4
Q

Capital

A

Man made aids to production

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5
Q

Enterprise

A

The willingness of an entrepreneur to take risks and organise production

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6
Q

Specialisation

A

The concentration by a worker or workers, firm, region or whole economy on a narrow range of goods and service

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7
Q

Opportunity Cost

A

The cost of the next best alternative which is foregone when a choice is made

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8
Q

Production Possibility Curve/Frontier

A

The maximum quantities of different combinations of two product, given current resources and state of technology

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9
Q

Market

A

Where or when buyers and sellers meet to trade or exchange goods or services

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10
Q

Demand

A

The quantity of a product that consumers are able and willing to purchase at various prices over a period of time.

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11
Q

Consumer surplus

A

The extra amount that a consumer is willing to pay for a product above the price actually paid

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12
Q

Supply

A

The quantity of a product that producers are able and willing to provide at different market prices over a period of time

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13
Q

Producer surplus

A

The difference between the price a producer is willing to accept and what Is actually paid

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14
Q

Equilibrium price

A

The price where demand and supply are equal. Also known as the clearing price.

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15
Q

Allocative efficiency

A

Where consumer satisfaction is maximised.

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16
Q

Command economy

A

An economic system in which most resources are state owned and also allocated centrally

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17
Q

Free market economy

A

An economic system whereby resources are allocated through the market sources of demand and supply

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18
Q

Mixed economy

A

An economic system in which resources are allocated through a mixture of the market and direct public sector movement

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19
Q

Trade-off

A

Linked to opportunity cost,requires trading off one item against another.

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20
Q

Price elasticity of demand- definition

A

The responsiveness of the quantity demanded to a change in the price of the product

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21
Q

Price elasticity of demand- equation

A 
%change in the quantity demanded/ %change in price 
PED bigger than 1 =elastic 
PED less than 1 = inelastic 
PED= 1 = unitary elasticity 
Figure should be negative
22
Q

Income elasticity of demand- definition

A

The responsiveness of demand to a change in income

23
Q

Income elasticity of demand- equation

A

YED= %change in the quantity demanded/ %change in income

Positive sign = normal good
Negative sign = inferior good

YED more than one= elastic
YED less than one= inelastic
YED= 1 = unitary elasticity

24
Q

Cross elasticity of demand- definition

A

The responsiveness of demand for one product in relation to a change in price in another product

25
Q

Cross elasticity of demand- equation

A

%change in quantity demanded of good A / %change in price of good B

XED less than one = weak relationship - inelastic
XED more than one= strong relationship- elastic
0= no relationship

26
Q

Price elasticity of supply- definition

A

The responsiveness of the quantity supplied to a change in the price of a product

27
Q

Price elasticity of supply- equation

A

PES= %change in the quantity supplied/ %change in price

Sign should always be positive
PES more than one= price elastic
PES less than 2= price inelastic
PES= 2= unitary

28
Q

Market failure

A

Where the free market mechanism fails to achieve economic efficiency

29
Q

Inefficiency

A

Any situation where economic efficiency is not achieved

30
Q

Information failure

A

A lack of information resulting in consumers and producers making decisions that do not maximise welfare

31
Q

Asymmetric information

A

Information not equally shared between two parties- resources are not used efficiently

32
Q

Externality

A

An effect whereby those not directly involved in taking a decision are affected by the actions of others

33
Q

Third party

A

Those not directly involved in making a decision

34
Q

Negative Externalities

A

This exists where the social cost of a social activity is greater than the private cost

35
Q

Private cost

A

The cost incurred by those taking a particular action

36
Q

Social cost

A

The total cost of a particular action

37
Q

External cost

A

The cost that is a consequence of externalities to third parties

38
Q

Positive Externalities

A

This exists where the social benefit of an activity exceeds the private benefit

39
Q

Private benefit

A

The benefit directly accruing to those taking a particular action

40
Q

Social benefit

A

The total benefit of a particular action

41
Q

External benefit

A

The benefits that accrue as a consequence of externalities to third parties

42
Q

Merit goods

A

These have more private benefits than their consumers actually realise

43
Q

Demerit goods

A

Their consumption of more harmful than people actually realise

44
Q

Public goods

A

Goods that are collectively consumed and have the characteristics of non-excludability and non rivalry

45
Q

Free rider

A

Someone who directly benefits from the consumption of a public good but who does not contribute towards its provision

46
Q

Quasi-Public Good

A

Goods having some but not all the characteristics of a public good

47
Q

Direct tax

A

One that taxes the income of people and firms and can not be avoided

48
Q

Indirect tax

A

A tax levied on goods and services

49
Q

Incidence of taxation

A

The division of a tax burden between buyers and sellers

50
Q

Subsidy

A

A payment usually from the Government, to encourage production and consumption

51
Q

Tradable permit

A

A permit that allows the owner to emit a certain amount of pollution and that, if unused or only partially used, can be sold to another polluter

52
Q

Information provision

A

The supply of information resulting in consumers and producers making decisions that maximise welfare

Economics (3 decks)

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