Key terms 2

Question 1

Excess demand

Answer 1

When demand is greater than supply at a given price

Question 2

Excess supply

Answer 2

When supply is greater thandemand at a given price

Question 3

Externalities

Answer 3

Spillover effectcs to third parties of a market transaction

Question 4

Factors of production

Answer 4

Capital equipment,enterprise,land and labour

Question 5

Fixed costs

Answer 5

Costs of production that do not vary with output

Question 6

Free goods

Answer 6

Goods that have no opportunity cost in consumption

Question 7

Free market economy

Answer 7

One in which there is no or very little government intervention in the allocation of resources

Question 8

Free rider problem

Answer 8

when some consumers benefit from other consumers purchasing a good,especially in case of a public good

Question 9

Government failure

Answer 9

When government intervention to correct market failure does not improve the allocation of resources

Question 10

Incidence of tax

Answer 10

the proportion of tax passed on to the consumer

Question 11

Income elasticity of demand

Answer 11

The responsivenee of quantity demanded to a change in income

Question 12

Indirect tax

Answer 12

A tax on spending

Question 13

Inferior goods

Answer 13

Goods or services that will see a fall in demand when income rises

Question 14

Market

Answer 14

A situation where buyers are in contact with sellers of a good or service

Question 15

Markert failure

Answer 15

When the free market fails to achieve an efficienct or equitable allocation of resources

Question 16

Maximum price

Answer 16

A price ceiling above which the price of a good or service is not allowed to increase. distorts equilibrium

Question 17

Merit good

Answer 17

A good or service that would be under consumed in a free market, as individuals do not fully perceive the benefits from consumption

Question 18

Microeconomis

Answer 18

Study of individual markets

Question 19

Minimum price

Answer 19

A price floor below which the price of a good or service is not allowed to decrese

Question 20

Mixed economy

Answer 20

An economic sisttem where resources are allocated by state planning and market forces

Question 21

Monopoly

Answer 21

A market structure dominated by a single seller of a good or service

Question 22

Negative externalities

Answer 22

Costs imposed on a third party not invloved witj the consumption or production of the good

Question 23

Normal good

Answer 23

A good or service that will see an increase in demand as income rise