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P PM > Glossary nur Micro > Flashcards

Glossary nur Micro Flashcards

1
Q

ability to pay principle

A

the idea that taxes should be levied on a person according to how well that person can shoulder the burden

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2
Q

abnormal profit

A

the profit over and above normal profit

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3
Q

absolute advantage

A

exists where a producer can produce a good using fewer factor inputs than another

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4
Q

accounting profit

A

total revenue minus total explicit cost

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5
Q

ad valorem tax

A

a tax levied as a percentage of the price of a good

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6
Q

allocative efficiency

A

a resource allocation where the value of the output by sellers matches the value placed on that output by buyers

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7
Q

arbitrage

A

the process of buying a good in one market at a low price and selling it in another market at a higher price in order to profit from the price difference

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8
Q

average fixed cost

A

fixed costs divided by the quantity of output

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9
Q

average revenue

A

total revenue divided by the quantity sold

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10
Q

average tax rate

A

total taxes paid divided by total income

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11
Q

average total cost

A

total cost divided by the quantity of output

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12
Q

average variable cost

A

variable costs divided by the quantity of output

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13
Q

bargaining process

A

an agreed outcome between two interested and competing economic agents
barriers to entry

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14
Q

benefits principle

A

the idea that people should pay taxes based on the benefits they receive from government services

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15
Q

bounded rationality

A

the idea that humans make decisions under the constraints of limited - and sometimes unreliable - information

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16
Q

brand proliferation

A

a strategy designed to deter entry to a market by producing a number of products within a product line as different brands
branding

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17
Q

budget constraint

A

the limit on the consumption bundles that a consumer can afford

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18
Q

capital

A

the equipment and structures used to produce goods and services

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19
Q

capitalist economic system

A

a system which relies on the private ownership of factors of production to produce goods and services which are exchanged through a price mechanism and where production is operated primarily for profit

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20
Q

cartel

A

a group of firms acting in unison

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21
Q

ceteris paribus (other things being equal)

A

a term used to describe analysis where one variable in the model is allowed to vary while others are held constant

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22
Q

choice set

A

the set of alternatives available to the consumer

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23
Q

club goods

A

goods that are excludable but non-rival in consumption
Coase theorem

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24
Q

collusion

A

an agreement among firms in a market about quantities to produce or prices to charge

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25
Q

common resources

A

goods that are rival but not excludable

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26
Q

comparative advantage

A

the comparison among producers of a good according to their opportunity cost. A producer is said to have a comparative advantage in the production of a good if the opportunity cost is lower than that of another producer

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27
Q

comparative statics

A

the comparison of one initial static equilibrium with another

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28
Q

competitive market

A

a market in which there are many buyers and sellers so that each has a negligible impact on the market price

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29
Q

complements

A

two goods for which an increase in the price of one leads to a decrease in the demand for the other

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30
Q

concentration ratio

A

the proportion of total market share accounted for by a particular number of firms

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31
Q

constant returns to scale

A

the property whereby long-run average total cost stays the same as the quantity of output changes

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32
Q

consumer surplus

A

a buyer’s willingness to pay minus the amount the buyer actually pays

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33
Q

copyright

A

the right of an individual or organization to own things they create in the same way as a physical object - to prevent others from copying or reproducing the creation

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34
Q

cost

A

the value of everything a seller must give up to produce a good

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35
Q

cost-benefit analysis

A

a study that compares the costs and benefits to society of providing a public good

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36
Q

counterfactual

A

analysis is based on a premise of what would have occurred if something had not happened

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37
Q

cronyism

A

a situation where the allocation of resources in the market is determined in part by political decision-making and favours rather than by economic forces
cross-price elasticity of demand

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38
Q

deadweight loss

A

the fall in total surplus that results from a market distortion - such as a tax

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39
Q

demand curve

A

a graph of the relationship between the price of a good and the quantity demanded

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40
Q

demand schedule

A

a table that shows the relationship between the price of a good and the quantity demanded

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41
Q

de-merit goods

A

goods that are over-consumed if left to the market mechanism and which generate both private and social costs which are not taken into account by the decision maker

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42
Q

diminishing marginal product

A

the property whereby the marginal product of an input declines as the quantity of the input increases
diminishing marginal utility

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43
Q

direct taxes

A

a tax levied on income and wealth

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44
Q

diseconomies of scale

A

the property whereby long-run average total cost rises as the quantity of output increases

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45
Q

dominant strategy

A

a strategy that is best for a player in a game regardless of the strategies chosen by the other players

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46
Q

economic activity

A

how much buying and selling goes on in the economy over a period of time

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47
Q

economic agents

A

an individual - firm or organization that has an impact in some way on an economy

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48
Q

economic growth

A

the increase in the amount of goods and services in an economy over a period of time

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49
Q

economic profit

A

total revenue minus total cost - including both explicit and implicit costs

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50
Q

economic system

A

the way in which resources are organized and allocated to provide for the needs of an economy’s citizens

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51
Q

economics

A

the study of how society manages its scarce resources

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52
Q

economies of scale

A

the property whereby long-run average total cost falls as the quantity of output increases

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53
Q

economy

A

all the production and exchange activities that take place

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54
Q

efficiency

A

the property of a resource allocation

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55
Q

elasticity

A

a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants

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56
Q

endogenous variable

A

a variable whose value is determined within the model

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57
Q

Engel curve

A

a line showing the relationship between demand and levels of income

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58
Q

equilibrium or market price

A

the price where the quantity demanded is the same as the quantity supplied

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59
Q

equilibrium quantity

A

the quantity bought and sold at the equilibrium price

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60
Q

equity

A

the property of distributing economic prosperity (=Wohlstand) fairly among the members of society

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61
Q

excludable

A

the property of a good whereby a person can be prevented from using it when they do not pay for it

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62
Q

exogenous variable

A

a variable whose value is determined outside the model

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63
Q

expected utility theory

A

the idea that preferences can and will be ranked by buyers

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64
Q

explicit costs

A

input costs that require an outlay of money by the firm

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65
Q

exports

A

goods produced domestically and sold abroad leading to an inflow of funds into a country

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66
Q

external economies of scale

A

the advantages of large-scale production that arise through the growth and concentration of the industry

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67
Q

externality

A

the cost or benefit of one person’s decision on the well-being of a bystander (a third party) which the decision maker does not take into account when making the decision

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68
Q

falsifiability

A

the possibility of a theory being rejected as a result of the new observations or new data

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69
Q

fixed costs

A

costs that are not determined by the quantity of output produced

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70
Q

framing effect

A

the differing response to choices dependent on the way in which choices are presented

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71
Q

free rider

A

a person who receives the benefit of a good but avoids paying for it

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72
Q

game theory

A

the study of how people behave in strategic situations

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73
Q

generalization

A

the act of formulating general concepts or explanations by inferring from specific instances of an event or behaviour

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74
Q

Giffen good

A

a good for which an increase in the price raises the quantity demanded

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75
Q

government failure

A

a situation where political power and incentives distort decision-making so that decisions are made which conflict with economic efficiency

76
Q

gross domestic product (GDP)

A

the market value of all final goods and services produced within a country in a given period of time

77
Q

gross domestic product per capita

A

the market value of all goods and services produced within a country in a given period of time divided by the population of a country to give a per capita figure

78
Q

heuristics

A

short cuts or rules of thumb that people use in decision-making

79
Q

horizontal equity

A

the idea that taxpayers with similar abilities to pay taxes should pay the same amount

80
Q

hypothesis

A

an assumption - tentative prediction - explanation - or supposition for something

81
Q

imperfect competition

A

exists where firms are able to differentiate their product in some way and so can have some influence over price
implicit costs

82
Q

income elasticity of demand

A

a measure of how much quantity demanded of a good responds to a change in consumers’ income - computed as the percentage change in quantity demanded divided by the percentage change in income

83
Q

indifference curve

A

a curve that shows consumption bundles that give the consumer the same level of satisfaction

84
Q

indirect tax

A

a tax levied on the sale of goods and services

85
Q

inference

A

a conclusion or explanation derived from evidence and reasoning
inferior good

86
Q

inflation

A

an increase in the overall level of prices in the economy

87
Q

internal economies of scale

A

the advantages of large-scale production that arise through the growth of the firm

88
Q

internalizing an externality

A

altering incentives so that people take account of the external effects of their actions

89
Q

intertemporal choice

A

where decisions made today can affect choices facing individuals in the future

90
Q

isocost line

A

a line showing the different combination of factor inputs which can be purchased with a given budget

91
Q

labour

A

the human effort - both mental and physical - that goes into production

92
Q

land

A

all the natural resources of the earth
law of demand

93
Q

logrolling

A

the agreement between politicians to exchange support on an issue

94
Q

lump-sum tax

A

a tax that is the same amount for every person

95
Q

macroeconomics

A

the study of economy-wide phenomena - including inflation - unemployment and economic growth

96
Q

marginal abatement cost

A

the cost expressed in terms of the last unit of pollution not emitted (abated)
marginal changes

97
Q

marginal rate of substitution

A

the rate at which a consumer is willing to trade one good for another

98
Q

marginal rate of technical substitution

A

the rate at which one factor input can be substituted for another at a given level of output

99
Q

marginal revenue

A

the change in total revenue from an additional unit sold

100
Q

marginal tax rate

A

the extra taxes paid on an additional unit of income

101
Q

marginal utility

A

the addition to total utility as a result of consuming one extra unit of a good

102
Q

market

A

a group of buyers and sellers of a particular good or service

103
Q

market economy

A

an economy that addresses the three key questions of the economic problem by allocating resources through the decentralized decisions of many firms and households as they interact in markets for goods and services

104
Q

market failure

A

a situation where scarce resources are not allocated to their most efficient use

105
Q

market power

A

the ability of a single economic agent (or small group of agents) to have a substantial influence on market prices or output

106
Q

market segments

A

the breaking down of customers into groups with similar buying habits or characteristics

107
Q

market share

A

the proportion of total sales in a market accounted for by a particular firm

108
Q

merit goods

A

goods which can be provided by the market but may be under-consumed as a result of imperfect information about the benefits
microeconomics

109
Q

monopolistic competition

A

a market structure in which many firms sell products that are similar but not identical

110
Q

monopoly

A

a firm that is the sole seller of a product without close substitutes

111
Q

Nash equilibrium

A

a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen

112
Q

natural monopoly

A

a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms

113
Q

negative externality

A

the costs imposed on a third party of a decision

114
Q

normal good

A

a good for which - ceteris paribus - an increase in income leads to an increase in demand (and vice versa)

115
Q

normal profit

A

the minimum amount required to keep factors of production in their current use
normative statements

116
Q

objective well-being

A

measures of the quality of life using specified indicators.

117
Q

oligopoly

A

competition amongst the few – a market structure in which only a few sellers offer similar or identical products and dominate the market

118
Q

opportunity cost

A

whatever must be given up to obtain some item; the value of the benefits foregone (sacrificed)

119
Q

Pareto improvement

A

when an action makes at least one economic agent better off without harming another economic agent

120
Q

patent

A

the right conferred on the owner to prevent anyone else making or using an invention or manufacturing process without permission

121
Q

payoff matrix

A

a table showing the possible combination of outcomes (payoffs) depending on the strategy chosen by each player

122
Q

perfect complements

A

two goods with right-angle indifference curves
perfect price discrimination

123
Q

perfect substitutes

A

two goods with straight line indifference curves

124
Q

Pigovian tax

A

a tax enacted to correct the effects of a negative externality
planned economic systems

125
Q

positional arms race

A

a situation where individuals invest in a series of measures designed to gain them an advantage but which simply offset each other
positional externality

126
Q

positive externality

A

the benefits to a third party of a decision

127
Q

positive statements

A

claims that attempt to describe the world as it is

128
Q

Prebisch–Singer hypothesis

A

a hypothesis suggesting that the rate at which primary products exchange for manufactured goods declines over time meaning that countries specialising in primary good production become poorer

129
Q

predatory or destroyer pricing

A

a situation where firms hold price below average cost for a period to try and force out competitors or prevent new firms from entering the market

130
Q

price ceiling

A

a legal maximum on the price at which a good can be sold

131
Q

price–consumption curve

A

a line showing the consumer optimum for two goods as the price of one of the goods changes - assuming incomes and the price of the good are held constant

132
Q

price discrimination

A

the business practice of selling the same good at different prices to different customers

133
Q

price elasticity of demand

A

a measure of how much the quantity demanded of a good responds to a change in the price of that good - computed as the percentage change in quantity demanded divided by the percentage change in price

134
Q

price elasticity of supply

A

a measure of how much the quantity supplied of a good responds to a change in the price of that good - computed as the percentage change in quantity supplied divided by the percentage change in price

135
Q

price floor

A

a legal minimum on the price at which a good can be sold

136
Q

prisoner’s dilemma

A

a particular ‘game’ between two captured prisoners that illustrates why cooperation is difficult to maintain even when it is mutually beneficial

137
Q

private goods

A

goods that are both excludable and rival

138
Q

private sector

A

that part of the economy where business activity is owned - financed and controlled by private individuals

139
Q

privatization

A

the transfer of publicly owned assets to private sector ownership

140
Q

producer surplus

A

the amount a seller is paid for a good minus the seller’s cost
production function

141
Q

production isoquant

A

a function representing all possible combinations of factor inputs that can be used to produce a given level of output
production possibilities frontier

142
Q

productivity

A

the quantity of goods and services produced from each hour of a worker or factor of production’s time

143
Q

progressive tax

A

a tax for which high-income taxpayers pay a larger fraction of their income than do low-income taxpayers

144
Q

property rights

A

the exclusive right of an individual - group or organization to determine how a resource is used

145
Q

proportional tax (or flat tax)

A

a tax for which high-income and low-income taxpayers pay the same fraction of income

146
Q

public choice theory

A

the analysis of governmental behavior - and the behaviour of individuals who interact with government

147
Q

public goods

A

goods that are neither excludable nor rival

148
Q

public interest

A

making decisions based on a principle where the maximum benefit is gained by the largest number of people at minimum cost

149
Q

public sector

A

that part of the economy where business activity is owned - financed and controlled by the state - and goods and services are provided by the state on behalf of the population as a whole

150
Q

quantity demanded

A

the amount of a good that buyers are willing and able to purchase at different prices

151
Q

quantity supplied

A

the amount of a good that sellers are willing and able to sell at different prices

152
Q

rational

A

the assumption that decision-makers can make consistent choices between alternatives

153
Q

rational ignorance effect

A

the tendency of a voter to not seek out information to make an informed choice in elections

154
Q

regressive tax

A

a tax for which high-income taxpayers pay a smaller fraction of their income than do low-income taxpayers

155
Q

rent seeking

A

where individuals or groups take actions to redirect resources to generate income (rents) for themselves or the group

156
Q

rival

A

the property of a good whereby one person’s use diminishes other people’s use

157
Q

scarcity

A

the limited nature of society’s resources

158
Q

sequential move games

A

games where players make decisions in sequence with some players able to observe the strategic choices of others

159
Q

shortage

A

a situation in which quantity demanded is greater than quantity supplied at the going market price
short run

160
Q

social welfare function

A

the collective utility of society which is reflected by consumer and producer surplus

161
Q

special interest effect

A

where benefits to a minority special interest group are outweighed by the costs imposed on the majority
specific tax

162
Q

standard of living

A

refers to the amount of goods and services that can be purchased by the population of a country. Usually measured by the inflation-adjusted (real) income per head of the population

163
Q

subjective well-being

A

the way in which people evaluate their own happiness
subsidy

164
Q

substitution effect

A

the change in consumption that results when a price change moves the consumer along a given indifference curve to a point with a new marginal rate of substitution

165
Q

sunk cost

A

a cost that has already been committed and cannot be recovered

166
Q

supply curve

A

a graph of the relationship between the price of a good and the quantity supplied

167
Q

supply schedule

A

a table that shows the relationship between the price of a good and the quantity supplied

168
Q

surplus

A

a situation in which the quantity supplied is greater than the quantity demanded at the going market price

169
Q

synergies

A

where the perceived benefits of the combined operations of a merged organization are greater than those which would arise if the firms stayed separate

170
Q

tacit collusion

A

when firm behaviour results in a market outcome that appears to be anti-competitive but has arisen because firms acknowledge that they are interdependent

171
Q

tariff

A

a tax on goods produced abroad and sold domestically
tax incidence

172
Q

total expenditure

A

the amount paid by buyers - computed as the price of the good times the quantity purchased

173
Q

total revenue

A

the amount received by sellers of a good - computed as the price of the good times the quantity sold

174
Q

total surplus

A

the total value to buyers of the goods - as measured by their willingness to pay - minus the cost to sellers of providing those goods

175
Q

total utility

A

the satisfaction gained from the consumption of a good

176
Q

trade-off

A

the loss of the benefits from a decision to forego or sacrifice one option - balanced against the benefits incurred from the choice made

177
Q

Tragedy of the Commons

A

a parable that illustrates why common resources get used more than is desirable from the standpoint of society as a whole
transaction costs

178
Q

utility

A

the satisfaction derived from the consumption of a certain quantity of a product

179
Q

value

A

the worth to an individual of owning an item represented by the satisfaction derived from its consumption and their willingness to pay to own it

180
Q

variable costs

A

costs that are dependent on the quantity of output produced

181
Q

vertical equity

A

the idea that taxpayers with a greater ability to pay taxes should pay larger amounts

182
Q

welfare economics

A

the study of how the allocation of resources affects economic well-being

183
Q

willingness to pay

A

the maximum amount that a buyer will pay for a good

184
Q

world price

A

the price of a good that prevails in the world market for that good

185
Q

x-inefficiency

A

the failure of a firm to operate at maximum efficiency due to a lack of competitive pressure and reduced incentives to control costs

P PM (16 decks)

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