First 30 Key Terms Flashcards
Allocative Efficiency
Allocative efficiency is a state of the economy in which production represents consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing.
Asymmetric Information
One party in a market transaction has more information than the other. Making it unfair or misleading for the less informed.
Capital
Capital is one of the four factors of production. Capital goods are used to produce consumer goods.
Ceteris Paribus
The assumption that all other factors will stay the same apart from the factor being discussed.
Change in Demand
A change or shift in the markets total demand.
Choice
When one alternative is selected over another.
Clearing price
A market-clearing price is the price of a good at which quantity supplied is equal to quantity demanded.
Complements
A goods demand increases when the price of another decreases. It has negative cross elasticity of demand.
Cross elasticity of demand
The responsiveness of the quantity demanded for a good as a result of a change in the price of another good.
Demand
Consumers willingness/desire to pay a price for a specific good.
Demand Curve
A graph showing the relationship between the price of a good and the amount off consumers willing to pay a given price.
Demand Schedule
A table of quantity demanded of a good at different prices. So it’s easy to determine the expected quantity demanded.
Demerit good
The consumption of a good is considered degrading/unhealthy and having a negative affect on consumers.
Direct tax
A tax paid by an individual/company to an imposing entity. For example income tax and property tax is paid to the government.
Division of labour
Dividing the production process into different stages between different workers. It increases overall efficiency as workers specialise in certain areas.
Economic efficiency
An economic state in which every resource is used effectively to optimum capacity. It minimises waste and inefficiency.
Economic Problem
Consumers have unlimited wants and needs while there are limited resources to go round.
Economic system
Countries and governments distribute resources, goods and services.
Effective demand
The demand for a product or service which occurs when purchasers are constrained in a different market
Efficiency
Resources are being used effectively.
Elastic
Any small change in price causes changes in supply, demand, income or another product.
Elasticity
The responsiveness of supply and demand to charges in price
Entrepreneur
An individual who runs a business instead of working as an employee and takes risks to set up companies.
Entrepreneurship
the activity of setting up a business or businesses, taking on financial risks in the hope of profit.
