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Economics Unit 1 > Definitions > Flashcards

Definitions Flashcards

0
Q

What is market failure

A

When the price mechanism fails to allocate resources efficiently

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1
Q

What is a PPF

A

The combinations of 2 goods which an economy is capable of producing using all its resources in the most efficient way

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2
Q

PED=?

A

%change in quantity
%change in price

Elastic > 1

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3
Q

YED=?

A

% change in QD

% change in Y

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4
Q

XED=?

A

% change in QD of good B

% change in price of good A

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5
Q

PES=?

A

% change in QS
% change in P

Elastic > 1

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6
Q

What is Price Mechanism?

A

The means by which millions of decisions taken by consumers and businesses interact to determine the allocation of scarce resources between competing uses

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7
Q

Ad Valorem tax

A

An indirect tax based on a percentage of the sale price of a good or service

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8
Q

Allocative efficiency

A

When the price the consumer pays equals the marginal cost

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9
Q

Barter

A

The practice of exchanging a good or a service for another

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10
Q

Basic economic problem

A

Unlimited wants limited resources

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11
Q

Buffer stock

A

A scheme which seeks to stabilise the market price of agricultural products by buying up supplies of the product when harvests are plentiful and selling stocks onto the market when supplies are low

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12
Q

Pollution permits or carbon credits

A

An allowance to a business to generate a specific level of emissions - may be traded on the carbon market

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13
Q

Competitive supply

A

Alternative products a firm can make with its resources (eg a farmer can plant potatoes or carrots // an electronics factory can produce DVDs or CDs)

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14
Q

Complement goods

A

Goods to be in joint demand

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15
Q

Consumer surplus

A

The difference between what the consumer is willing to pay for a good and what they actually get

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16
Q

De-merit goods

A

Goods which have a negative externality. Consumers may be unaware of this if there is imperfect information

17
Q

Division of labour

A

The specialisation of labour In Specific tasks intended to increase productivity

18
Q

Externality

A

The spill over effects from the consumption or production of a good

19
Q

Government failure

A

Policies that cause a deeper market failure

20
Q

Incidence of tax

A

How the final burden of tax is shared out

21
Q

Indirect tax

A

A tax imposed on the producers eg excise duties on cigarettes, alcohol or even ad Valorem taxes

22
Q

In elastic demand

A

When PED

23
Q

Inelastic supply

A

When PES

24
Q

Inferior good

A

when demand for a product falls as real income increases

25
Q

Market failure

A

When the competitive outcome of markets is not efficient from the point of view of the economy as a whole

26
Q

Merit good

A

A product that society values and judges that everyone should have regardless of whether an individual wants them (so the government provides it)

27
Q

Normal goods

A

Have positive PED
Necessities have PED between 0 and +1
Luxuries have PED > +1

28
Q

Normative statement

A

A subjective statement

29
Q

Positive statement

A

A statement of fact

30
Q

Opportunity cost

A

The cost of the next best alternative foregone in a decision

31
Q

Producer surplus

A

The difference between what a producer is willing and able to supply a good at and what they actually get

32
Q

Public good

A

Non rivalrous non excludable

33
Q

Regressive tax

A

A tax is said to be regressive when low income earners pay a higher proportion of their income in tax than high income earners

34
Q

Social benefit

A

Social benefit = private cost + external benefit

35
Q

Social cost

A

Social cost = private cost + external cost

36
Q

Specialisation

A

A method of production where a business or area focuses on the production of a limited scope of products to gain greater productive efficiency

37
Q

Subsidy

A

Payments by the government to suppliers to reduce their costs with the aim of increasing supply and therefore reducing the Pe

38
Q

Total revenue

A

TR=PxQ

39
Q

Pareto optimality

A

the best possible allocation of resources. Efficiency occurs when resources cannot be reallocated to make one consumer better off without making someone worse off

40
Q

Productive efficiency

A

Using the least amount of resources to produce a given good or service
OR
Output being produced at the lowest possible unit cost

41
Q

Geographical mobility of labour

A

The ability of labour to take available work in different areas/regions

Economics Unit 1 (1 decks)

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