Key Definitions Flashcards
Ceteris paribus
All other things being equal
Normative statements
Subjective statements. Value judgement based on opinion
Positive statements
Objective statements based on evidence and can be tested
Absolute advantage
Being able to produce more of something than another country
Comparative advantage
Being able to produce something at a lower opportunity cost than another country
Consumer surplus
The difference between the price the consumer would pay and the market price the consumer has to pay
Producer surplus
Difference between what producers are willing and able to supply an good for and the price they actually receive
Marginal utility
The additional satisfaction a consumer gains from consuming one more unit of a good or service
Specialisation
Where individuals, firms or countries concentrate on producing a narrow range of goods or services
Division of labour
Where a firm specialises in producing a good or service and the production is broken down into separate tasks
Subsidy
An amount of money given directly to firms by the government to encourage production and consumtion
Externality
The cost or benefit that affects a third party who did not choose to receive the cost or benefit
Flat tax
A tax system with a constant marginal rate, usually applied to individual or corporate income.
Ad Valorem tax
A tax whose amount is based on the value of a transaction
Minimum pricing
Placing a price which the market price cannot legally go below
