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Y1 MICRO How Competitive Markets Work > Definitions > Flashcards

Definitions Flashcards

1
Q

Resource allocation

A

How scarce resources are chosen to produce particular goods and services

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2
Q

Incentive function

A

Increase/decrease in price provides incentive to producers to increase/decrease their supply

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3
Q

Signalling function

A

Increase/decrease in price signals to consumers to decrease/increase demand and signals to producers to increase/decrease supply

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4
Q

Rationing function

A

When demand > supply, market will ration supply by increasing price. When demand < supply, market will reduce supply by decreasing price

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5
Q

Free market economy

A

Market decides how resources are allocated

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6
Q

Planned economy

A

Government decides what is produces and how it’s allocated

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7
Q

Mixed economy

A

Goods and services are provided through the market system except where government chooses to intervene to prevent market failure

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8
Q

Maximisation

A

Where economic agents want to maximise their objectives

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9
Q

Market

A

Where buyers and sellers meet in order to exchange goods and services

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10
Q

Sub-market

A

Distinguishable part of a market

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11
Q

Individual demand

A

Amount of a good or service that an individual consumer is willing and able to buy at any given price over a period of time

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12
Q

Market demand

A

Relates to all consumers in a market and so market demand is the sum of the demand by every consumer in the market

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13
Q

Demand

A

Quantity of a good or service that consumers are willing and able to buy at various prices per period of time

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14
Q

Joint demand

A

Where two products are used together

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15
Q

Derived demand

A

Demand for one good is determined by the demand for another good

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16
Q

Competitive demand

A

A good is purchased as an alternative to another good (pork vs. beef)

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17
Q

Composite demand

A

A good is purchased for another purpose (milk for cheese)

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18
Q

Consumer surplus

A

Extra amount a consumer is willing to pay for a product above the price actually paid

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19
Q

Individual supply

A

Amount of a good or service that an individual firm/supplier is prepared to offer for sale at any given price over a period of time

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20
Q

Market supply

A

Related to all firms in a market and so market supply is the sum of the supply by every firm in a market

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21
Q

Supply

A

Amount of a good or service put into the market by firms at various prices in a particular time period

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22
Q

Joint supply

A

Production of one good automatically leading to the supply of another (beef producing leather)

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23
Q

Competitive supply

A

Supplier can only supply more of one good by producing less of another

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24
Q

Composite supply

A

A good can be obtained from different sources (electricity from solar vs. hydroelectric)

25
Q

Producer surplus

A

Difference between the price a producer is willing to accept to supply goods and services and what is actually accepted

26
Q

Equilibrium price

A

Where quantity demanded by consumer and quantity supplied by producers is equal

27
Q

Disequilibrium

A

Any position in the market where demand and supply are not equal

28
Q

Elasticity

A

Measures the responsiveness of one variable to changes in another variable

29
Q

Price elasticity of demand PED

A

The responsiveness of quantity demanded to changes in price of goods/services

30
Q

Income elasticity of demand YED

A

The responsiveness of quantity demanded to changes in income

31
Q

Cross elasticity of demand XED

A

The responsiveness of quantity demanded of one product to changes in price of another product

32
Q

Price elasticity of supply PES

A

The responsiveness of quantity supplies to changes in market price

33
Q

Substitute goods

A

Compete with one another (alternatives)

34
Q

Complementary goods

A

Joint demand so they are consumed together

35
Q

Real disposable income

A

Income after taxes have been deducted and state benefits added and then adjusted to take into account changes in price level

36
Q

Inferior goods

A

Increased Y = decreased D (YED<0)

37
Q

Normal good

A

Increased Y = increased D (0

38
Q

Superior good

A

Increased Y = increased D (YED>1)

39
Q

Total revenue

A

Money received from selling goods and services

40
Q

Price discrimination

A

Policy of charging consumers different prices for the same product

41
Q

Productive efficiency

A

Production of good and services by firms is achieved at the lowest possible average total cost choosing appropriate combinations of input to produce the maximum output from that input

42
Q

Allocative efficiency

A

Right amounts of the right goods and services produced where consumer satisfaction is maximised

43
Q

Economic efficiency

A

Where both productive and allocative efficiency are achieved. Society produced a balance of good consumer wish to consume at a minimum cost

44
Q

Cost efficiency

A

The appropriate combination of input of factors of production given the relative prices of those factors

45
Q

Technical efficiency

A

Attaining he maximum possible output from a given set of inputs

46
Q

Inefficiency

A

Where economic efficiency is not achieved

47
Q

Total fixed cost TFC

A

Costs that do not vary directly with output

48
Q

Total variable costs TVC

A

Costs that do vary directly with output

49
Q

Total cost TC

A

Sum of all costs incurred in production of given levels of output

50
Q

Average cost AC

A

Average cost per unit

51
Q

Average fixed cost AFC

A

Average fixed cost per unit

52
Q

Average variable cost AVC

A

Average variable cost per unit

53
Q

Marginal cost MC

A

Cost of producing one more additional unit of output

54
Q

Economies of scale

A

A proportionate saving in costs gained by an increased level of production

55
Q

Internal economies of scale

A

Economies of scale that arise from the expansion of a firm (first half of LATC)

56
Q

External economies of scale

A

Economies of scale that arise from the expansion of the industry in which a firm is in operation (shift LATC down)

57
Q

Diseconomies of scale

A

Occur when average total cost rises when output increases

58
Q

Internal diseconomies of scale

A

Diseconomies of scale that arise from the expansion of a firm (second half of LATC)

59
Q

External diseconomies of scale

A

Diseconomies of scale that arise from the expansion of the industry in which a firm is in operation (shift LATC up)

Y1 MICRO How Competitive Markets Work (8 decks)

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