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A Level Economics > Key Words Micro > Flashcards

Key Words Micro Flashcards

1
Q

Adverse selection

A

A situation in which a person at risk is more likely to take out insurance

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2
Q

Allocative efficiency

A

Achieved when consumer satisfaction is maximised

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3
Q

Asymmetric information

A

A situation in which some participants in a market have better information about market conditions than others

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4
Q

Average total cost(ATC)

A

Total cost divided by the quantity produced

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5
Q

Buffer stock

A

A scheme intended to stabilise the price of a commodity by buying excess supply in periods when supply is high, and selling when supply is low

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6
Q

Capitalism

A

A system of production in which there is a private ownership of productive resources, and individuals are free to pursue their objectives with minimal interference from government

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7
Q

Centrally planned economy

A

Decisions on resource allocation are guided by the state

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8
Q

Ceteris paribus

A

A Latin phrase meaning ‘other things being equal’; it is used in economics when we focus on changes in one variable while holding other influences constant

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9
Q

Comparative static analysis

A

Examines the effect on the equilibrium of a change in the external conditions affecting a market

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10
Q

Competitive demand

A

Demand for goods that are in competition with each other

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11
Q

Competitive market

A

A market in which individual firms cannot influence the price of the good or service they are selling because of competition from other firms

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12
Q

Competitive supply

A

A situation in which a firm can use its factors of production to produce alternative products

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13
Q

Complements

A

Two goods are said to be complements if people tend to consume them jointly, so that an increase in the price of one good causes the demand for the other good to fall

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14
Q

Composite demand

A

Demand for a good that has multiple uses

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15
Q

Composite supply

A

Where a product produced by a firm serves more than one market

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16
Q

Consumer surplus

A

The value that consumers gain from consuming a good or service over and above the price paid

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17
Q

Consumption externality

A

An externality that affects the consumption side of a market, which may be either positive or negative

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18
Q

Cost efficiency

A

The appropriate combination of inputs of factors of production, given the relative prices of those factors

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19
Q

Cross elasticity of demand (XED)

A

A measure of the sensitivity of a quantity demanded of a good or service to a change in price of some other good or service

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20
Q

Demand

A

The quantity of a good or service that consumers are willing and able to buy at any possible price in a given period

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21
Q

Demand curve

A

A graph showing how much of a good will be demanded by consumers at any given price

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22
Q

Demerit goods

A

A good that brings less benefit to consumers than they expect, such that too much will be consumed by individuals in a free market

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23
Q

Derived demand

A

Demand for a factor of production or a good which derives not from the factor or the goods itself, but from the goods it produces

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24
Q

Division of labour

A

A process whereby the production procedure is broken down into a sequence of stages and workers are assigned to particular stages

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25
Economic efficiency
A situation where both productive efficiency and allocative efficiency have been reached
26
Economic growth
An expansion in the productive capacity of the economy
27
Economies of scale
They occur for a firm when an increase in the scale of productions leads to production at lower long run average costs
28
Elasticity
The measure of the sensitivity of one variable to changes in another variable
29
Excess burden of a sales tax
The deadweight loss to society following the imposition of a sales tax
30
External cost
A cost which is associated with an individual's (a firm or households) production or other economic activities, which is borne by a third party
31
Externality
A cost of benefit that is external to a market transaction, and thus not reflected in market prices
32
Factors of production
Resources used the the production process; inputs into production, including labour, capital, land and entrepreneurship
33
Firm
An organisation that brings together factors of production in order to produce output
34
Fixed costs
Costs incurred by a firm that do not vary with the level of output
35
Free market economy
One in which resource allocation is guided by market forces without intervention by the state
36
Free-rider problem
When an individual cannot be excluded from consuming a good and thus has no incentive to pay for its provision
37
Government failure
A misallocation of resources arising from government intervention
38
Gross domestic product (GDP)
A measure of the economic activity carried out in an economy during a period
39
Incidence of tax
The way in which the burden of paying a sales tax is divided between buyers and sellers
40
Income elasticity of demand (YED)
A measure of the sensitivity of quantity demanded to a change in consumer income
41
Indirect tax
A tax levied on expenditure on goods and services (as opposed to a direct tax, which is a tax charged directly to an individual based on a component of income)
42
Inferior good
One where the quantity demanded decreases in response to an increase in consumer incomes
43
Ad valorem tax
A tax levied on a commodity set as a percentage of the selling price
44
Internalising an externality
An attempt to deal with an externality by bringing an external cost or benefit into the price system
45
Invisible hand
Term used by Adam Smith to describe the way in which resources are allocated in a market economy
46
Joint demand
Demand for goods which are interdependent, such that they are demanded together
47
Joint supply
Where a firm produces more than one product together
48
Law of demand
A law that states that there is an inverse relationship between quantity demanded and the price of a good or device, ceteris paribus
49
Macroeconomics
The study of the interrelationships between economic variables at an aggregate (economy-wide) level
50
Marginal cost
(MC) the cost of producing an additional unit of output
51
Marginal social benefit
(MSB) the additional benefit that society gains from consuming an extra unit of a good
52
Marginal social costs
(MSC) the cost to society of producing and extra unit of a good
53
Market
A set of arrangements that allow transactions to take place
54
Market economy
Market forces are allowed to guide the allocation of resources within a society
55
Market equilibrium
A situation that occurs in a market when the price is such that the quantity that consumers wish to buy is exactly balanced by the quantity that firms wish to supply
56
Market failure
A situation in which the free market mechanism does not lead to an optimal allocation of resources, e.g. Where there is a divergence between marginal social benefit and marginal social costs
57
Merit good
A good that brings unanticipated benefits to consumers, such that society believes it will be under consumed in a free market
58
Microeconomics
The study of economic decisions taken by individual economic agents, including households and firms
59
Minimum wage
A system designed to protect the low paid by setting a minimum wage rate that employers are permitted to offer workers
60
Mixed economy
Resources are allocated partly through price signals and partly on the basis of direction by government
61
Model
A simplified representation of reality used to provide insight into economic decisions and events
62
Moral hazard
A situation in which a person who has taken out insurance is more prone to taking more risk
63
Normal good
One where the quantity demanded increases in response to an increase in consumer incomes
64
Normative statement
A statement involving a value judgement that is what ought to be
65
Opportunity cost
In decision making, the value of the next-best alternative forgone
66
Pareto optimum
An allocation of resources is said to be a Pareto optimum if no reallocation of resources can make an individual better off without making some other individuals worse off
67
Positive statement
A statement about what is, i.e. About facts
68
Price elasticity of demand
PED A measure of the sensitivity of quantity demanded to a change in the price of a good or service
69
Price elasticity of supply
PES A measure of the sensitivity of quantity supplied of a good or service to a change in the price of that good or service
70
Private costs
A cost incurred by an individual (firm or consumer) as part of its production or other economic activities
71
Producer surplus
The difference between the price received by firms for a good or service and the price at which they would have been prepared to supple that good or service
72
Production externality
An externality that affects the production side of a market, which may be either positive or negative
73
Production possibility curve
A curve showing the maximum combinations of goods or services that can be produced in a set period of time given available resources
74
Productive efficiency
Attained when a firm operates at minimum average costs, chiding an appropriate combination of inputs (cost efficiency) and producing the maximum output possible from the or inputs (technical efficiency)
75
Prohibition
An attempt to prevent the consumption of a demerit good by declaring it illegal
76
Public good
A good that is non-exclusive and non-rivalrous Consumers cannot be excluded from consuming the good, and consumption by one person does not affect the amount of the good available for others to consume
77
Resource allocation
The way in which a society's productive assists are used amongst their alternative uses
78
Scarcity
A situation that arises because people have unlimited wants in the face of limited resources
79
Specific tax
A tax of a fixed amount imposed on purchases of a commodity
80
Subsidy
A grant given by the government to producers to encourage production of a good or service
81
Substitutes
Two goods are said to be substitutes if consumers regard them as alternatives, so that the demand for one good is likely to rise if the price of he other good rises
82
Sunk costs
Costs incurred by a firm that cannot be recovered if the firm ceases trading
83
Superior good
One for which the income elasticity of demand is positive, and greater than 1, such that income rises, consumers spend proportionally more on the good
84
Supply curve
A graph showing the quantity supplied at any given price
85
Technical efficiency
Attaining the maximum possible output from a given set of inputs
86
Total cost
(TC) The sum of all costs that are incurred in producing a given level of output
87
Unemployment
Results when people seeking work at the going wage cannot find a job
88
Variable costs
Costs that vary with the level of output

A Level Economics (15 decks)

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