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Micro year 1 > Definitions year 1 > Flashcards

Definitions year 1 Flashcards

1
Q

Ad valorem tax

A

An indirect tax imposed on a good where the value of the tax is dependent on the value of the good.

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2
Q

Asymmetric information

A

Where one party has more information than another, leading to a market failure.

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3
Q

Capital

A

One of the four factors of production; goods which can be used in the production process.

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4
Q

Ceteris paribus

A

All other things remaining the same.

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5
Q

Command economy

A

All factors of production are allocated by the state, so they decide what, how and for whom to produce goods.

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6
Q

Complementary goods

A

Negative XED; if good B becomes more expensive, demand for good A falls.

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7
Q

Consumer goods

A

Goods bought and demanded by households and individuals.

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8
Q

Consumer surplus

A

The difference the price a consumer is willing to pay and they price they actually pay.

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9
Q

XED

A

The responsiveness of demand for one good (A) to a change in price in the price of another good (B).

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

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10
Q

Demand

A

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

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11
Q

Diminishing marginal utility

A

The extra benefit gained from consumption of good generally declines as extra units are consume. This is why the demand curve is downwards sloping.

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12
Q

Division of labour

A

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

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13
Q

Economic problem

A

The problem of scarcity; wants are unlimited but resources are finite so choice have to be made.

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14
Q

Efficiency

A

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

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15
Q

Enterprise

A

One of the four factors of production; the willingness and ability to take risks and combine the three other factors of production.

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16
Q

Equilibrium price/quantity

A

Where demand equals supply so there are no more market forces bringing about change to price of quantity demanded.

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17
Q

Excess demand

A

When price is set too low so demand is greater than supply.

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18
Q

Excess supply

A

When price is set too high so supply is greater than demand.

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19
Q

Externalities

A

The cost or benefit a third part receives from an economic transaction outside of the market mechanism.

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20
Q

External cost

A

The cost or benefit to a third party not involved in the economics activity; the difference between social cost/benefit and private cost/benefit.

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21
Q

Free market

A

An economy where the market mechanism allocates resources so consumers and producers make decision about what is produced, how to produce and for whom.

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22
Q

Free rider principle

A

People who do not pay for a public good still receives benefits from it so the private sector will under-provide the good as they cannot make a profit.

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23
Q

Government failure

A

When a government intervention leads to a net welfare loss in society.

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24
Q

Incidence of tax

A

The tax burden on the taxpayer.

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25
Q

YED

A

The responsiveness of demand to change in income.

%change in QD/%change in Y

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26
Q

Indirect tax

A

Taxes on expenditure which increase production costs and lead to a fall in supply.

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27
Q

Inferior goods

A

YED goods <0; goods which fall in demand as income increases.

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28
Q

Information gap

A

When an economic agent lacks the information needed to make a rational, informed decision.

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29
Q

Information provision

A

When the government intervenes to provide information to correct market failure.

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30
Q

Labour

A

One of the four factors of production; human capital.

31
Q

Land

A

One of the four factors of production; natural resources such as oil, coal, wheat, physical space.

32
Q

Luxury goods

A

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

33
Q

Market failure

A

When the free market fails to allocate resources to the best interest of society, so there is an inefficient allocation of scarce resources.

34
Q

Market forces

A

Force in the free markets which act to reduce prices when there is excess supply and increase them when there is excess demand.

35
Q

Maximum price

A

A ceiling price which a firm cannot charge above.

36
Q

Minimum price

A

A floor price which a firm cannot charge below.

37
Q

Mixed economy

A

Both free market mechanism and the government fails to allocate scarce resources.

38
Q

Model

A

A hypothesis which can be proven or tested by evidence to be mathematical whilst theory is in words.

39
Q

Non-excludable

A

A characteristic of public goods; someone cannot be prevented from using the good.

40
Q

Non-renewable resources

A

Resources which cannot be readily replenished or replaced at a level equal to consumption; the stock level decreases over time as they are consumed.

41
Q

Non-rivalry

A

A characteristics of public goods; one person’s use of the goods does not prevent someone else from using it.

42
Q

Normal goods

A

YED>0;demand increases as income increases.

43
Q

Normative statement

A

Subjective statements based on value judgements and opinion; cannot be proven or disproven.

44
Q

Opportunity cost

A

The value of the next best alternative foregone.

45
Q

Perfectly price elastic good

A

PED/PES = infinity; quantity demand/supply falls to 0 when price changes.

46
Q

Perfectly price inelastic good

A

PED/PES = 0; quantity demanded/supplied does not change when price changes.

47
Q

Positive externalities of consumption

A

Where the social benefits of consuming a good are larger than the private benefits of consuming that good.

48
Q

Positive statement

A

Objective statements which can be tested which factual evidence to be proven or disproven.

49
Q

Possibility production frontier (PPF)

A

Depicts the maximum productive potential of an economy, using a combination of two goods or services, when resources are fully and efficiently employed.

50
Q

PED

A

The responsiveness of demand to change in price

% change in QD/ % in Price

51
Q

PES

A

The responsiveness of supply to a change in price.

% change in QS/ % change in Price

52
Q

Price mechanism

A

The system of resource allocation based on the free market movement of prices, determined by the demand and supply curves.

53
Q

Private cost/benefit

A

The cost/benefit to the individual participating in economy activity.

54
Q

Private goods

A

Goods that are rivalry and excludable.

55
Q

Producer surplus

A

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

56
Q

Public goods

A

Goods that are non-excludable and non-rivalry.

57
Q

Rationality

A

Decision making that leads to economics agents maximising their utility.

58
Q

Regulation

A

Laws to address market failure and promote competition between firms.

59
Q

Renewable resources.

A

Resources which can be replenished, so the stock of resources can be maintained over a period of time.

60
Q

Scarcity

A

The shortage of resources in relation to quantity demanded of human wants.

61
Q

Social cost/benefit

A

The cost/benefit to society as whole due to economic activity.

62
Q

Social optimum position

A

Where social costs equal social benefit; the amount which should be produced/consumed in order to maximise social welfare.

63
Q

Social science

A

The studies of society and human behaviour.

64
Q

Specialisation

A

The production of a limited range of goods by a company/country/individual so they aren’t self-sufficient and have to trade with others.

65
Q

Specific tax

A

A tax imposed on a good where the value of a tax is dependent on the quantity that is bought.

66
Q

State provision of goods.

A

Through taxation, the government provides public goods or merit goods which are underprovided by the free market.

67
Q

Subsidy

A

Government payments to a producer to lower their costs of production and encourage them to produce more.

68
Q

Substitutes

A

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

69
Q

Supply

A

The ability and willingness to provide a particular good services at a give price at a given moment in time.

70
Q

Symmetric information

A

Where buyers and sellers both have access to the same information.

71
Q

Trade pollution permits.

A

Licenses which allow business to pollute up to a certain amount. The government controls the number of licenses and so can control the amount of pollution. Businesses are allowed to sell and buy the permits which means there may be incentive to reduce the amount they pollute.

72
Q

Unitary price elastic good

A

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

73
Q

Utility

A

The satisfaction derived from consuming a good.

74
Q

Weakness at computation

A

A cause of irrational behaviour; when consumers are bad at making calculations, estimating probabilities and working out future benefits/costs,

Micro year 1 (7 decks)

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