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Economics > Economics Key Words > Flashcards

Economics Key Words Flashcards

1
Q

Ceteris Paribus

A

‘All other factors remain the same”

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2
Q

Factors of Production

A

Land, Labour, Capital, Enterprise

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3
Q

Market Mechanism

A

Used to price resources obtained from the government

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4
Q

Creative destruction

A

Refers to the dynamic effects of innovation in markets- technological advancements leading to continual replacement of old industries

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5
Q

Opportunity cost

A

‘The next best alternative foregone’

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6
Q

Factor inputs

A

resources used in the production process to produce output

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7
Q

Social Norms

A

‘a pattern of behaviour that is widely accepted by society’

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8
Q

Veblen goods

A

Where people pay more for a certain product as the product price increases ‘snob effect’

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9
Q

(Real)

A

Adjusted for the effects of inflation

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10
Q

(Nominal)

A

Not adjusted for the effects of inflation

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11
Q

Free Market

A

An economic system based on supply and demand with little to no government control

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12
Q

‘Brain drain’

A

the migration of highly skilled or educated individuals from one country to another, often in search of better job opportunities or working conditions

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13
Q

Consumer Surplus

A

the difference between the maximum price a consumer is willing to pay for a product or service compared to the actual price they pay for it

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14
Q

Producer Surplus

A

the additional profit that producers earn when they sell a good or service compared to their minimum acceptable price

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15
Q

Consumer Welfare

A

The benefits that an individual derives from the consumption of goods or services

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16
Q

‘Hit and Run’

A

-Associated with Contestable Markets
-New firms join an industry, selling their product for a short period of time then leaving
-to cream off some supernormal profit of incumbents and then exit

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17
Q

Interdependence

A

Means firms in the market must take into account the likely reaction of their rivals to any change in price, output or forms of non-price competition

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18
Q

Inflation

A

A sustained increase in the general price level

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19
Q

Cost-push inflation

A

-Where an increase in costs of production decreases supply, pushing the price level up leading to inflation

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20
Q

Demand-pull inflation

A

-where an increase in aggregate demand pulls up price level, leading to inflation

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21
Q

Hysteresis Unemployment

A

Refers to long-term unemployment that results from the persistence of high unemployment rates over an extended period of time.

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22
Q

“Unemployment Trap”

A

Refers to where economics incentives to take a job are poor

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23
Q

“Poverty Trap”

A

Refers to where there are disincentives to earn extra income

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24
Q

“Occupational immobility”

A

Refers to barriers to moving easily between jobs

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25
Q

“Geographical Immobility”

A

Refers to barriers to changing location to find a new job

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26
Q

Market concentration

A

measures the extent to which sales in a market are dominated by one or more businesses

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27
Q

Competition policy

A

Aims to promote competition; make markets work better and contribute towards improved efficiency in individual markets and enhanced competitiveness of UK businesses

28
Q

Regulation

A

A set of rules imposed by the government

29
Q

Legislation

A

Process or result of enrolling laws

30
Q

Comparative advantage

A

The principle states that countries should specialise in producing the goods that they can produce more efficiently or at a lower opportunity cost than other countries

-e.g. UK exporter of services

-e.g. US capital-intensive labour

31
Q

Price ceiling

A

Regulated maximum price in a market

32
Q

Price floor

A

Regulated minimum price in a market

33
Q

Tragedy of the Commons

A

When no one’s owns a resource, it may get over-used

e.g. deforestation

34
Q

Regulatory capture

A

A form of market failure that happens when a government agency operates in favour of producers rather than consumers

35
Q

Rent seeking

A

A concept that states than an individual may seek to increase their own wealth without creating any benefits or new wealth to the society

36
Q

Rent control

A

Type of maximum price introduced into the private rental market to control prices of housing

37
Q

Human capital

A

A measure of individuals’ skills, knowledge, abilities, work experience

38
Q

Sustainable development

A

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs

39
Q

Globalisation

A

The process of which economies have become more inter-connected through global networks of trade and spread of technology

40
Q

Economic development

A

Sustained improvements in the quality of life or living standards overtime

-measured using GDP per capita

41
Q

“Rationally choice theory”

A

involves the weighing up of costs and benefits and trying to maximise the surplus of benefits over costs.

42
Q

“Principle-Agent problem”

A

An agent is someone who is authorised and agrees to act (i.e. make decisions) on behalf of someone else. For example, in a commercial business, an agent might be the manager of a store.

43
Q

Adverse selection

A

Adverse selection occurs when information asymmetry leads to the selection of unfavorable or risky choices

44
Q

Moral Hazard

A

the tendency of individuals or institutions to take on more risk when they are insulated from the potential consequences of their actions.

45
Q

“Game theory”-Nash Equilibrium

A

concerned with predicting the outcome of games of strategy, in which the “players” (two or more businesses competing in a market) have incomplete information about the other’s intentions.

46
Q

Prisoner’s dilemma

A

Refers to why it may be difficult for forms to collude as both players select their own dominant strategies for personal gain/interest

47
Q

“The free-rider problem”

A

refers to the difficulty of providing a public good or service when some individuals can consume it without contributing to its production or financing.

48
Q

“Relative”

A

considered in relation or in proportion to something else

49
Q

“Derived”

A

‘Steamed from something ‘

50
Q

Inferior good

A

Refers to a product with a negative income elasticity of demand

-e.g. generic goods

51
Q

Normal good

A

Refers to any product with a positive income elasticity of demand

e.g. household appliances

52
Q

Luxury good

A

Refers to a product with a highly positive income elasticity of demand

-demand increases more than proportionally as income rises

-e.g. designer clothes

53
Q

Necessity goods

A

Refers to goods that are considered to be essential to life, we cannot live without necessity goods

e.g. basic everyday clothing

54
Q

‘Indivisibilities relations with Capital’

A

Refers to where some machinery has a minimum size it can operate

55
Q

Volume economies

A

-costs increased less rapidly than capacity

56
Q

Multiplier effect

A

Occurs when an initial injection into the circular flow causes a bigger final increase in real national income

e.g. government spending creating new jobs

57
Q

Trickle down Economics

A

The process whereby the economic gains from economic growth pass down throughout the entire society eventually giving rise to inclusive development

Works with entrepreneurs and would not work with criminals like pablo Escobar

58
Q

Stagflation

A

refers to an unfortunate and costly combination of stagnant (slow) economic growth, rising unemployment and high and rising inflation

59
Q

Inferior Good

A

Inferior goods have a negative income elasticity of demand; as consumers’ income rises, they buy fewer inferior goods. A typical example of such a type of product is margarine, which is much cheaper than butter

60
Q

Privatisation

A

The sale of state-owned companies back to the private sector, normally through a stock market listing

61
Q

Nationalisation (public ownership)

A

The process of taking an industry into Government ownership

62
Q

Domestic

A

Home country

63
Q

SPICED

A

S-Strong
P-Pound
I- Imports
C- Cheap
E- Exports
D- Dere

64
Q

WIDCED

A

W- weak pound
I- imports
D- dere
Weak pound- exports cheap

65
Q

Costs of Production

A
66
Q

Customer inertia

A

Customers unwilling to go through the hassle of changing banks

Economics (7 decks)

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