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Econ AS > EXAM! > Flashcards

EXAM! Flashcards

1
Q

Define normative statement

A

Value judgements that can’t be concluded from looking at the evidence avalible

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2
Q

Define positive statement

A

Statement that can be scientifically tested by referring to evidence to see if correct

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3
Q

Distinguish the difference between a need and a want

A

Need: necessity, needed for survival
Want: not a necessity, not needed for survival, something desired

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4
Q

Define economic welfare

A

Well being of an individual/group within society/an economy

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5
Q

Define factions of production

A

Inputs into the production process

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6
Q

What is the basic economic problem

A

Wants are infinite and resources are scarce

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7
Q

Define opportunity cost

A

The cost of giving up the next best alternative

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8
Q

What’s the difference between a free good and an economic good

A

Free good: a resource that isn’t scarce/available without limit
Economic good: good that can be sold

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9
Q

Define demand

A

Quantity of a good/service that consumers are willing and able to buy at a given price over a given period of time

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10
Q

Define price elasticity of demand and show equation

A

Measures to the extent the demand of a good changes in response to a change in price of the good
%change in Q D
—————-
%change in P

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11
Q

Distinguish between a Normal good and an inferior good

A

Normal: demand increases when income increases (vice versa)
Inferior: demand decreases when income increases (vice versa)

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12
Q

What is income elasticity of demand?

A

Measures the extent to which demand for a good changes in response to a change in income
% change in Q D
—————–
% change in Y

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13
Q

What is cross elasticity of demand?

A

Measures extent to which the demand of a good changes in response to a change in price of another good
%change of Q D of good A
—————————-
% change in P of good B

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14
Q

Define supply

A

Quantity of a good/ service a firm is willing and able to sell at given prices over a period of time

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15
Q

What is price elasticity of supply

A

Mesure the extent to which supply of a good changes in response to a change in price
%change in Q supplied
————————
%change in P

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16
Q

What is market equilibrium?

A

When planned demand meets planned supply (no excess D or S)

Curves cross

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17
Q

What is market disequilibrium?

A

Excess demand or supply (any price other than the equilibrium

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18
Q

Define derived demand

A

Demand for a good/service involved in producing another good/service

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19
Q

Define composite demand

A

Goods that have more than one use

20
Q

Define goods in joint supply

A

When one good is produced and other is also produced as part of the production process of producing the first good

21
Q

Define joint demand

A

Goods complementary to each other bought together

22
Q

What are the conditions of demand

A
  • income: normal, inferior
  • change in price of substitute goods
  • change in price of complementary goods
  • tastes/preferences
  • population/size
  • future predictions
23
Q

What are the conditions of supply?

A
  • changes in costs of production
  • taxes/subsidies
  • changes in price of goods in joint supply
  • changes in price of substitutes
  • technology
  • knowledge
  • weather
24
Q

Define productivity

A

Output per unit of input over a period of time

25
Q

Define production

A

Process/processes converting inputs into outputs

26
Q

Define specialisation. What are the advantages?

A

A worker performing a task/narrow range of tasks

  • more efficient
  • saves time
27
Q

Define the division of labour

A

Different workers performing different tasks in the course of producing a good/service

28
Q

Define short run

A

Time period in which at least one factor of production is fixed and cannot be varied

29
Q

Define long run

A

Time period in which no factors of production are fixed and in which all the factors of production can be varied

30
Q

Distinguish between fixed cost and variable cost

A

Fixed cost: cost of production in the short run does not change with output

Variable cost: cost of production which changed with output produced in the short and long run

31
Q

Distinguish between economies and diseconomies of scale

A

Economies of scale: as output increases average long run costs fall

Diseconomies of scale: as output increases long run average costs rise

32
Q

Define total revenue and state equation

A

Money a firm received from selling its output

Price X Q sold

33
Q

Define total costs and state equation

A

Whole cost of producing a particular level of output

Fixed cost + variable cost

34
Q

Define market structure

A

Organisation of a market in terms of the number of firms in the market and how they behave

35
Q

Define pure monopoly

A

When there is only one firm in the market

36
Q

Define monopoly power

A

Power of a firm to act as the price maker not taker

-makes short and long term profits

37
Q

What are the conditions of perfect competition

A
  • large number of buyers and sellers in the market
  • perfect market info
  • ability to buy and sell desired amount at given price level
  • individual sellers can’t influence a market
  • homogenous product (no branding)
  • no barriers to entry
38
Q

Define allocative efficiency

A

When avalible economic resources are used to produce the combination of goods/services that best match people’s tastes and preferences

39
Q

Define productive efficiency

A

When it is impossible to produce more of one good without producing less of another (opp cost)

40
Q

Define barriers to entry

A

Obstacles for new firms to enter the market

41
Q

What is the concentration ratio

A

Indicates total market share for a number of leading firms

Output of them as a percentage of total market output

42
Q

Define market failure

A

When the free market forces of demand and supply leads to a misallocation of resources

43
Q

What are market forces

A

Forces of demand and supply allocating the price and quantity of scarce resources

44
Q

Distinguish between a merit good and a demerit good

A

Merit : good/service providing greater social benefits than private/long term benefits exceeding short term
Demerit: greater social costs then private costs when consumed

45
Q

Distinguish between a private and public good

A

Private: good which is excludable and diminishable
Public: good which is non excludable and non diminishable

Econ AS (7 decks)

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