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Economics - Micro > Economics > Flashcards

Economics Flashcards

Key Definitions

1
Q

Ceteris Paribus

A

When the effect of a change in one variable is considered, it is assumed that all other variables are held constant.

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2
Q

Normative Statements

A

Subjective statements based on value judgments and cannot be proved or disproved.

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3
Q

Positive Statements

A

Objective statements based on evidence or facts which can therefor, be proved or disproved.

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4
Q

Scarcity

A

Resources are finite whereas wants are infinite.

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5
Q

Factors of Production

A

Resources that include - Land, Labour, Capital and Enterprise.

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6
Q

Renewable Resources

A

Substance of economic value that can be replaced or replenished in the same or less amount of time than it takes to draw the supply down.

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7
Q

Non-renewable Resources

A

Resources which eventually will become depleted.

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8
Q

Opportunity Cost

A

The next best alternative forgone when a choice is made.

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9
Q

Production Possibility Frontier

A

Illustrates the maximum potential output of an economy when all resources are fully employed.

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10
Q

Economic Growth

A

An increase in the productive capacity of the economy indicating an increase in real output.

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11
Q

Division of Labour

A

When the work force is split up into small groups completing different tasks.

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12
Q

Money

A

Anything that is used as a medium of exchange for goods and or services.

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13
Q

Utility

A

The level of satisfaction a consumer receives from the consumption of a product or a service.

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14
Q

Demand

A

How much of a good or service is demanded at a given price over a certain amount of time.

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15
Q

Total Utility

A

The amount of satisfaction a person derives from the total amount of a product or service consumed.

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16
Q

Marginal Utility

A

The change in total utility from consuming one extra unit of a product.

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17
Q

The Law of Diminishing Marginal Utility

A

As consumption of a product increases, the consumers utility also increases however at a diminishing rate.

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18
Q

Price Elasticity of Demand

A

The responsiveness of demand to a change in price.

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19
Q

Total Revenue

A

The total value of goods sold by a firm and is calculated by multiplying price by quantity sold.

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20
Q

Cross Elasticity of Demand

A

The responsiveness of demand for one product due to the change in the price of another product.

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21
Q

Income Elasticity of Demand

A

The responsiveness of demand for a product after a change in real income.

22
Q

Supply

A

How much is supplied at a given price over a certain period of time.

23
Q

Price Elasticity of Supply

A

The responsiveness of supply due to a change in price

24
Q

Short Run

A

A time period in which there is at least one factor of production that is fixed.

25
Q

Long Run

A

A time period in which all factors of production can be variable.

26
Q

Excess Supply

A

Implies that the quantity supplied is greater than the quantity demanded at a given price level.

27
Q

Excess Demand

A

Implies that the quantity demanded is greater than the quantity supplied at a given price level.

28
Q

Indirect Taxes

A

Taxes on spending.

29
Q

Ad Valorem Taxes

A

A tax on a percentage of the price of the product.

30
Q

Specific Taxes

A

A set amount per unit of a product.

31
Q

Subsidy

A

A grant from the government which has the effect of reducing the costs of production for a firm.

32
Q

Market Failure

A

Occurs when the forces of demand and supply in a market do not result in inefficient allocation of resources.

33
Q

Externalities

A

Spill over effects on 3rd parties that are not directly involved in the transaction - may be positive or negative.

34
Q

Private Costs

A

Direct costs to consumers and producers for producing and consuming a product.

35
Q

External Costs

A

The costs to 3rd parties that are not involved in the initial transaction.

36
Q

Social Costs

A

The total sum of the private costs and the external costs.

37
Q

Private Benefits

A

Direct benefits to consumers or producers for producing or consuming a product.

38
Q

External Benefits

A

The benefits to 3rd parties that are not involved in the initial transaction.

39
Q

Social Benefits

A

The total sum of the private benefits and the external benefits.

40
Q

Public Good

A

Goods that are non-rivalrous and non-excludable.

41
Q

Non-rivalrous

A

The total amount available is not changed after one persons consumption.

42
Q

Non-excludable

A

Cannot prevent anyone from consuming.

43
Q

Free Rider Problem

A

The problem that once a product is provided it is impossible to prevent people from using it - therefor impossible to charge people for using it.

44
Q

Symmetric Information

A

Where both parties of a transaction have the same information.

45
Q

Asymmetric Information

A

Where one party in a transaction has more or superior information compared to another party.

46
Q

Maximum Price

A

A price usually set by the government which makes it illegal for firms to charge more than a certain price for a given quantity of a product.

47
Q

Minimum Price

A

A price usually set by the government which is a guaranteed minimum price for producers.

48
Q

Tradable Pollution Permits

A

Rights to sell and buy actual or potential pollution in artificially created markets.

49
Q

Property Rights

A

The exclusive authority to determine how a resource is used. Property Rights = Ownership Rights.

50
Q

Government Failure

A

When government Intervention results in a net welfare loss.

Economics - Micro (1 decks)

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