Defos

Question 1

Opportunity cost

Answer 1

cost of the next best alternative forgone when a choice is made

Question 2

Division of labour

Answer 2

occurs when specialisation has taken place where the productive process is broken down into separate tasks

Question 3

The law of demand

Answer 3

there is an inverse relationship between price and quantity demanded

Question 4

Demand

Answer 4

the quantity of a good or service that consumers are willing and able to buy at a given price in a given time period

Question 5

supply

Answer 5

the quantity of a good or service that suppliers are willing and able to supply at a given price in a govern time period

Question 6

law of supply

Answer 6

there is a positive relationship between price and quantity supplied

Question 7

consumer surplus

Answer 7

the difference between the price that consumers are willing and able to pay for a good or service and the price they actually pay

Question 8

producer surplus

Answer 8

the difference between the price producers are willing and able to supply a good or service at and the price they actually receive

Question 9

a market

Answer 9

any place where buyers meet sellers to exchange goods and services

Question 10

PED

Answer 10

measures the responsiveness of quantity demanded given a change in price

Question 11

PES

Answer 11

measures the responsiveness of quantity supplied given a change in price

Question 12

YED

Answer 12

measures the responsiveness of quantity demanded given a change in income

Question 13

XED

Answer 13

measures the responsiveness of quantity demanded of good A given a change in price of good B

Question 14

market failure

Answer 14

when the free market fails to allocate resources at the socially optimal level this leads to a net loss in social welfare

Question 15

negative externalities

Answer 15

detrimental third party effects as a result of the actions of a separate agent as a result there is an impact on welfare (society)

Question 16

positive externalities

Answer 16

third party benefits that come about as a result of actions from a separate agent

Question 17

merit goods

Answer 17

underconsumed and under provided in the free market because of missing information about their full benefits, have positive externalities in consumption

Question 18

demerit goods

Answer 18

overconsumed and over provided in the free market because of missing information about what their full effects are, have negative externalities in consumption

Question 19

asymmetric information

Answer 19

information exists but one party has got more information than another party

Question 20

public goods

Answer 20

non-excludable, non-rival

Question 21

quasi-public goods

Answer 21

public goods which might have some characteristics but not all of them

Question 22

indirect taxes

Answer 22

taxes which can be passed onto consumers (normally at a higher price)

Question 23

subsidies

Answer 23

money grants given to firms, the intention to lower costs of production to increase output and reduce price

Question 24

state provision

Answer 24

when the government comes and provides all the resources in that market

Question 25

regulation

Answer 25

government suppling rules and laws for firms and consumers to abide by

Question 26

government failure

Answer 26

occurs when the cost of implementing the policy outweighs the benefits which came about from the policy

Question 27

minimum price

Answer 27

price control set by the government normally above equilibrium price in a market to safeguard the incomes of producers or to ensure that workers in the market get a good enough wage to support a decent standard of living

Question 28

maximum price

Answer 28

price control, fixing the price normally below the equilibrium to support consumers

Question 29

fixed costs

Answer 29

costs that don't vary with output

Question 30

variable costs

Answer 30

costs that vary with output

Question 31

total cost

Answer 31

total fixed costs + total variable costs

Question 32

marginal cost

Answer 32

how much extra does it cost to produce another unit

Question 33

internal economies of scale

Answer 33

when a firm itself benefits from economies sclae

Question 34

external economies of scale

Answer 34

when the entire industry grows therefore all firms in the industry benefit from economies scale

Question 35

economies of scale

Answer 35

a reduction in average cost (long run), as output increases

Question 36

diseconomies of scale

Answer 36

LRAC rises as output increases

Question 37

normal profit

Answer 37

minimum level of profit required to keep factors of production in there current use

Question 38

supernormal profit

Answer 38

any profit made above normal profit

Question 39

subnormal profit (loss)

Answer 39

any economies profit below normal profit. the profit being made is not enough to cover the opportunity cost of production

Question 40

profit maximisation =

Answer 40

MC=MR

Question 41

revenue maximisation =

Answer 41

MR=0

Question 42

sales maximisation =

Answer 42

AC=AR

Question 43

allocative efficiency =

Answer 43

AR=MC

Question 44

productive efficiency =

Answer 44

minimum point on AC curve

Question 45

dynamic efficiency =

Answer 45

are supernormal profits being made to be reinvested?

Question 46

X efficiency =

Answer 46

any point on AC

Question 47

price discrimination

Answer 47

when different consumers are charged different prices

Question 48

privatisation

Answer 48

when state run organisations are sold off to the private sector

Question 49

deregulation

Answer 49

when government reduce legal barriers to entry in given industries

Question 50

nationalisation

Answer 50

process of taking an industry into public ownership

Question 51

regulatory bodies

Answer 51

specialised regulators who look after specific industries and companies operating within those industries

Question 52

cost benefit analysis

Answer 52

decision making tool accounting for the social costs and social benefits of a project overtime to establish a net present value

Question 53

derived demand

Answer 53

demand for a good or factor of production, not wanted for its own sake, which is a consequence of the demand for something else

Question 54

Joint demand

Answer 54

occurs when demand for two goods is interdependent

Question 55

composite demand

Answer 55

Demand for a good that has multiple different uses

Question 56

joint supply

Answer 56

a product or process that can yield two or more outputs.