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Theme 1 all economic definitions > every definition in AS economics > Flashcards

every definition in AS economics Flashcards

1
Q

Define 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

Define Asymmetric information?

A

Where one party has more information than the other, leading to market failure.

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3
Q

Define Capital?

A

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

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4
Q

Define capital goods?

A

Goods are produced in order to aid the production of consumer goods in the future.

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5
Q

Define ceteris paribus?

A

All other things remaining the same.

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6
Q

Define 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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7
Q

Define complementary goods?

A

If good B becomes more expensive, demand for good A.

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8
Q

Define consumer surplus?

A

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

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9
Q

Define cross elasticity of demand?

A

The responsiveness of demand for one good (A) to a change in
price of another good (B)
%change in QD of A
%change in P of B

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10
Q

Define 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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11
Q

Define Diminishing marginal utility?

A

The extra benefit gained from consumption of a good generally
declines as extra units are consumed; explains why the demand
curve is downward sloping

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12
Q

Define Division of labor?

A

When labor becomes specialized during the production process

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13
Q

Define Economic problem?

A

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

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14
Q

Define efficiency?

A

When resources are allocated optimally; so every consumer benefits and waste is minimized.

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15
Q

Define enterprise?

A

One of the 4 factors of production; the willingness and ability to take risks and combine the 3 factors of cell.

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16
Q

Define equilibrium price/quantity?

A

Where demand equals supply meaning there are no more market forces.

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17
Q

Define Excess demand?

A

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

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18
Q

Define excess supply?

A

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

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19
Q

Define externalities?

A

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

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20
Q

Define external cost/benefit?

A

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

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21
Q

Define free market?

A

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

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22
Q

Define the free-rider principle?

A

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

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23
Q

Define government failure?

A

When government intervention leads to a net welfare loss in society

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24
Q

Define habitual behaviour?

A

A cause of irrational behaviour; when consumers are in the habit of
making certain decisions

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25
Q

Define incidence of tax?

A

The tax burden on the taxpayer

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26
Q

Define YED?

A

The responsiveness of demand to a change in income
%change in QD
%change in Y

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27
Q

Define indirect tax?

A

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

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28
Q

Define inferior good?

A

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

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29
Q

Define information gap?

A

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

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30
Q

Define information provision?

A

When the government intervenes to provide information to correct
market failure

31
Q

Define labor?

A

One of the four factors of production; human capital

32
Q

Define land?

A

One of the four factors of production; natural resources.

33
Q

Define luxury goods?

A

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

34
Q

Define 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

35
Q

Define Market forces?

A

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

36
Q

Define maximum price?

A

price which a firm cannot charge above

37
Q

Define minimum price?

A

price which a firm cannot charge below

38
Q

Define mixed economy?

A

Both the free market mechanism and the government allocate

resources

39
Q

Define Negative externalities of production?

A

Where the social costs of producing a good are greater than the
private costs of producing the good.

40
Q

Define non-renewable resources?

A

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

41
Q

Define non-rivalry?

A

One person’s use of the good does not prevent someone else from using it.

42
Q

Define normal goods?

A

Demand will increase as income increases.

43
Q

Define normative statement?

A

This is defined as a subjective statement that is based on judgements and opinions which cannot be scientifically proven or disproven.

44
Q

Define OC?

A

The value of the next best alternative foregone.

45
Q

Define perfectly price elastic good?

A

This is when quantity demanded or supplied falls to 0 when price changes. -infinity

46
Q

Define perfectly price inelastic good?

A

This is when quantity demanded or supplied does not change when price changes.

47
Q

Define a positive statement?

A

Objective statements which can be tested with factual evidence that can be scientifically proven or disproven.

48
Q

Define positive externalities of consumption?

A

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

49
Q

Define PPF?

A

The maximum productive potential of an economy where resources are fully and efficiently employed.

50
Q

Define price elasticity of demand?

A

The responsiveness of demand to a change in price so %change in QD/% change in price.

51
Q

Define price elasticity of supply?

A

The responsiveness of supply to a change in price %change in QD/% change in price.

52
Q

Define price mechanism?

A

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

53
Q

Define private cost/benefit?

A

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

54
Q

Define private goods?

A

Goods that are rivalry and excludable.

55
Q

Define producer surplus?

A

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

56
Q

Define public goods?

A

Goods that are non-excludable and non-rivalry

57
Q

Define rationality?

A

Decision-making that leads to economic agents maximising their utulity.

58
Q

Define regulation?

A

Laws to address market failure and promote competition between firms

59
Q

Define relatively price elastic good?

A

Where demand/supply is responsive to a change in price. This means a small change in price leads to a large change in quantity demanded/supplied.

60
Q

Define relatively price inelastic good?

A

Where demand/supply is not responsive to a change in price. This means a large change in price will lead to a large price change in quantity demanded/supplied.

61
Q

Define renewable resources?

A

Resources that can be replenished so the stock of resources can be mantained over a period of time.

62
Q

Define scarcity?

A

The shortage of resources in comparison to the quantity of human wants.

63
Q

Define social cost/benefit?

A

The cost/benefit to society due to economic activity.

64
Q

Define social optimum position?

A

Where social costs equals to social benefits. The amount that should be produced/consumed to maximise social welfare.

65
Q

Define social science?

A

The study of societies and human behaviour.

66
Q

Define specialization?

A

The production of a limited range of goods bu a firm/country so they aren’t self sufficent to trade with others.

67
Q

Define specific tax?

A

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

68
Q

State subsidy?

A

Money granted by the government to firms in order to encourage them to produce more.

69
Q

Define substitutes?

A

If good B becomes more expensive, demand for good A rises also.

70
Q

Define supply?

A

The ability and willingness to provide a particular good/service at a given price at a given moment in time

71
Q

Define symmetric information?

A

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

72
Q

Define trade pollution permits?

A

Linces that allow business to pollute up to a certain amount. The government controls the amount of pollution.

73
Q

Define utulity?

A

The satisfaction dervied from consuming a good

Theme 1 all economic definitions (1 decks)

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