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ECON1101 > Definitions > Flashcards

Definitions Flashcards

1
Q

Production Possibility Curve

A

Represents all maximum output possibilities for two (or more) goods, given a set of inputs (or resources - i.e., time) if inputs are used efficiently.

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2
Q

Cost-benefit principle

A

an action should be taken if the marginal benefit is greater than the marginal cost

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3
Q

Quantity supplied

A

quantity of a given g/s that maximises the profit of the supplier

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4
Q

Supply curve

A

relationship b/w the price of a g/s and the quantity supplied of that g/s

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5
Q

Law of Supply

A

tendency for a producer to offer more of a certain g/s when the price of that g/s increases

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6
Q

Sunk cost

A

cost that once paid cannot be recovered

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7
Q

Factor of production is fixed

A

cost does not vary w/ the quantity produced

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8
Q

Fixed cost

A

cost associated w/ a fixed factor of production

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9
Q

Factor of production is variable

A

cost tend to vary w/ the quantity produced

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10
Q

Variable cost

A

cost associated w/ a variable factor of production

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11
Q

Short run shut down condition

A

period of time during which at least of one factor of production is fixed

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12
Q

Long run shut down condition

A

period of time during while all factors of production are variable

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13
Q

Profit

A

difference b/w the total revenue and total cost

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14
Q

Price Elasticity of Supply

A

% change in the quantity of supplied resulting from a very small % change in price. It also measures the responsiveness of the supply to change in price.

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15
Q

Law of supply

A

supply curves have the tendency of being upward sloping

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16
Q

Market

A

The Market for a given good or service is the set of
all the consumers and suppliers who are willing to
buy and sell that good or service at a given price

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17
Q

Market Equilibrium

A

Market Equilibrium occurs when the price and the
quantity sold of a given good is stable.
OR
Market
equilibrium occurs when the equilibrium price is
such that the quantity that consumers want today is
the same as the quantity that suppliers want to sell.

18
Q

Marginal Benefit

A

The Marginal Benefit of producing a certain unit
of a given good is the extra benefit accrued by
producing that unit.

19
Q

Marginal Cost

A

The Marginal Cost of producing a certain unit of
a given good is the extra cost of producing that
unit. (!!! The relevant cost is the “opportunity
cost” and not just the “absolute cost” of
producing the good.)

20
Q

Economic Surplus

A

The Economic Surplus of a certain action is the
difference between the marginal benefit and the
marginal cost of taking that action.

21
Q

Quantity Supplied

A

The Quantity Supplied by a supplier represents

the quantity of a given good or service that maximizes the profit of the supplier.

22
Q

Supply Curve

A

The Supply Curve represents the relationship
between the price of a good or service and the
quantity supplied of that good or service.

23
Q

Law of Supply

A

The tendency for a producer to offer more of a
certain good or service when the price of that
good or service increases.

24
Q

Sunk Cost

A

A Sunk Cost is a cost that once paid cannot be

recovered.

25
Q

Fixed Cost

A

A Fixed Cost is a cost associated with a fixed

factor of production.

26
Q

Variable Cost

A

A Variable Cost is a cost associated with a

variable factor of production.

27
Q

Profit

A 
The Profit represents the difference between the
total revenues (TR) and the total costs (TC).
28
Q

Price Elasticity of Supply

A

The Price Elasticity of Supply represents the
percentage change in the quantity supplied resulting
from a very small percentage change in price. It also
measures the responsiveness of the supply to
changes in price

29
Q

Elastic Supply

A

Supply is elastic when the price elasticity of supply is greater than 1.

30
Q

Unit Elastic Supply

A

Supply is unit elastic when the price elasticity of supply is equal to 1.

31
Q

Inelastic Supply

A

Supply is inelastic when the price elasticity of supply is less than 1.

32
Q

Model

A

Model is a simplified representation of reality.

33
Q

Efficient Production Point

A

combination of goods for which currently available resources (i.e. time) do not allow an increase in the production of one good without a reduction in the production of the other. All the points on the PPC are efficient.

34
Q

Inefficient Production Point

A

combination of goods for which currently available resources (i.e. time) allow an increase in the production of one good without a reduction in the production of the other. All the points below and to the left of the PPC are inefficient.

35
Q

Attainable Production Point

A

any combination of goods that can be produced with the currently available resources (i.e. time). All the points on the PPC or below and to the left of the PPC are attainable.

36
Q

Unattainable Production Point

A

any combination of goods that cannot be produced with the currently available resources (i.e. time). All the points that lie outside of the PPC are unattainable.

37
Q

Absolute Advantage

A

when he/she can carry on this activity with less resources (for example, less time) than another agent.

38
Q

Opportunity Cost

A

value of the next best alternative to that particular action.

39
Q

Comparative Advantage

A

when the economy has a lower opportunity cost of carrying on that activity than another agent.

40
Q

Principle of Comparative Advantage

A

everyone is better off if each agent (or each country) specializes in the activities for which they have a comparative advantage

41
Q

The Low-Hanging Fruit Principle (or Increasing Opportunity Cost)

A

process of increasing the production of any good, one first employs those resources with the lowest opportunity cost and only once these are exhausted turn to resources with higher cost.

42
Q

Consumption Possibility Curve (CPC)

A

represents all possible combinations that the economy can feasibly consume when it is open to international trade

ECON1101 (5 decks)

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