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econ > definitions theme 1 > Flashcards

definitions theme 1 Flashcards

1
Q

who are economic agents

A

consumers
producers
shareholders
employees
the government?

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2
Q

what are capital goods

A

goods produced in order to aid production of consumer goods in the future

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3
Q

what’re complementary goods

A

negative XED

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4
Q

what’re consumer goods

A

goods bought/demanded by households and individuals

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5
Q

what is an ad valorem tax

A

an indirect tax on a good where the value of the tax is dependent on the value of the good

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6
Q

what is consumer surplus

A

the difference between the price consumers are willing to pay and the price they actually pay

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7
Q

what is XED

A

responsiveness in demand for good A to a change in the price of good B

%change in QD of A
/
%change in P of B

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8
Q

what is demand

A

the quantity of a good/service that consumers are able and willing to buy at a given price at a given moment of time

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9
Q

what is diminishing marginal utility

A

the extra benefit gained from consumption of a good generally declines as extra units are consumed; explains the downward D slope

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10
Q

what is division of labour

A

when labour becomes specialised during the production process so do a specific task in cooperation with other workers

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11
Q

what is efficiency

A

when resources are allocated optimally, so every consumer benefits and waste is minimised

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12
Q

what is excess demand

A

when price is set too low so demand > supply

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13
Q

what is excess supply

A

when the price is set too high so supply > demand

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14
Q

what’re external costs/benefits

A

the cost/benefit to a 3rd party not involved in the economic activity; the difference between social cost/benefit and private cost/benefit

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15
Q

what’re externalities

A

the cost or benefit a 3rd party receives from an economic transaction outside of the market mechanism

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16
Q

what is the free market

A

an economy where the market mechanism allocated resources so consumers and producers make decisions about what is produced, how to produce them and for whom

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17
Q

what is government failure

A

when government intervention leads to a net welfare loss in society

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18
Q

what is incidence of tax

A

the tax burden on the taxpayer

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19
Q

what is YED

A

responsiveness of demand to a change in income (Y)
%change in QD
/
%change in Y

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20
Q

what is an indirect tax

A

taxes on expenditure which increases production costs and lead to a fall in supply

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21
Q

what’re inferior goods

A

YED <0; goods which see a fall in demand as income rises, vice versa

22
Q

what’re luxury goods

A

YED>1; an increase in incomes causes an even bigger increase in demand

23
Q

what is a veblen good

A

a good for which it’s demand increases with its price

24
Q

what is the market failure

A

when the free market fails to allocate recourses to the best interest of society, leading to inefficient allocation of scarce resources

25
Q

what’re market forces

A

forces in free markets which act to reduce prices when there is excess supply and increase when excess demand

26
Q

what is a mixed economy

A

both the free market mechanism and the government allocate resources

27
Q

what is an example of a free market economy

A

Singapore

28
Q

what is an example of a mixed market economy

A

the UK

29
Q

what is an example of a command economy

A

NK

30
Q

what is a normal good

A

YED>0; demand increases as income increases

31
Q

what is a normative statement

A

subjective statements based on value judgements; cannot be falsified

32
Q

what is opportunity cost

A

the value of the next best alternative forgone

33
Q

what is a perfectly price elastic good

A

PED/PES=Infinity; quantity demanded/supplied falls to 0 when price changes

34
Q

what is a perfectly price inelastic good

A

PED/PES = 0; quantity demanded/supplied doesn’t change when price changes

35
Q

what is a positive statement

A

objective statements which can be tested with factual evidence to be proven or disproven

36
Q

what is a PPF

A

shows the maximum productive potential of an economy, using a combination of 2 goods or services, when resources are fully efficiently employed

37
Q

what is PED

A

the responsiveness of demand to a change in price
%changeQD
/
%changeP

38
Q

what is PES

A

the responsiveness of supply to a change in price
%changeQD
/
%changeP

39
Q

what’re private goods

A

goods that are rivalrous and excludable

40
Q

what is producer surplus

A

the difference between the price the producer is willing to charge and the price they actually charge

41
Q

what’re the 2 functions of regulation

A

address market failure
promote competition between firms

42
Q

what is a relatively price elastic good

A

PED/PES>1; demand/supply is relatively responsive to a change in price

43
Q

what is a relatively price inelastic good

A

PED/PES<1; demand/supply is relatively unresponsive to a change in price

44
Q

what is scarcity

A

the shortage of resources in relation to the quantity demanded by humans

45
Q

what is the social optimum position

A

where social costs = social benefits; the amount which should be produced/consumed in order to maximise social welfare

46
Q

what is a specific tax

A

a tax on a good where the value of the tax is dependant on the quantity that is bought

47
Q

what’re substitutes

A

Positive XED; if good B becomes more expensive, demand for good A rises

48
Q

what is utility

A

the satisfaction of consuming a good

49
Q

what’re trade pollution permits

A

licenses allowing businesses to pollute up to a certain amount; quantity and details controlled by the government and can be sold/bought by businesses meaning there may be incentive to reduce the amount they pollute

50
Q

what is a unitary price elastic good

A

PED/PES=1; a change in price leads to a change in output by the same proportion

econ (10 decks)

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