Definitions Flashcards
Allocation of resources…
is the decision on how something that satisfies a humans want or need can be used for
Factor of production…
are the four inputs needed to make things that people want. They are: land, labour, capital and enterprise
Scarce resources…
is a limited quantity insufficient for the demand
Productive efficiency…
Outputting the desired amount of goods and services for the lowest average cost of production
Positive cross elasticity of demand…
is a measure of how the quantity demanded of one good responds to a change in price of another good
Price elasticity of supply…
is a measure of how the quantity supplied of a good/service responds to change in it’s price
Market mechanism…
is where buyers and sellers exchange goods/services
Market failure…
is where the price mechanism fails to allocate resources efficiently
Merit good…
A good or service which provides greater benefits when it is consumed than private benefits. Merit good tends to be underconsumed
Demerit good…
a good or service which has greater social costs when it’s consumed than private costs. Demerit goods tend to be overconsumed
Normal good…
a good for which demand increases as income rises
Marginal private costs…
is the
Minimum price…
is often set in aim to give producers a fair price
Maximum price…
is often set to increase consumption of a merit good or to make a necessity affordable
Subsidy…
is an amount of money paid by a government to the producer of a good/service to lower price and increase demand for the good/service
