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Microeconomics > Little Parts > Flashcards

Little Parts Flashcards

1
Q

What is a planned economy

A

Economy where desicions on what and how to produce are made by the government

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2
Q

Positives of a planned economy

A

Low unemployment
Affordable market prices
Economy focused on public welfare

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3
Q

Negatives of a planned economy

A

Lack of innovation due to low incentive for profit

Shortages in supply- low flexibility

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4
Q

What is a mixed economy

A

Economy where it mixes both freedom and govt intervention

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5
Q

Pros of mixed economy

A

Increased efficiency and productivity due to market based incentives

Allows govt to set strategic priorities through economic policy

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6
Q

Cons of mixed economy

A

Does not avoid market distorting effects of govt intervention

Finding right equilibrium hard , trade offs and crowding out

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7
Q

What is a free economy

A

Where individuals and businesses have their own freedom to make economic decisions

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8
Q

Pros of free economy

A

Choice increased
Incentives for efficiency and innovation

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9
Q

Cons of a free economy

A

Limited govt intervention-abusive business practices

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10
Q

Formula for marginal revenue

A

Change in total revenue/ change in quantity sold

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11
Q

Minimum efficient scale

A

Lowest point on a cost curve at which a company can produce its product at a competitive price

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12
Q

Demerit good

A

Good which has negative impact on consumer

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13
Q

Merit good

A

Has a positive effect on the consumer

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14
Q

Economic agents

A

Producers
Consumers
Government

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15
Q

Role of economic agents

A

Producers- produce goods and services
Consumers- purchase goods and services
Govt- collect tax, spend on public services and regulate

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16
Q

Consumer objective

A

Maximise satisfaction and utility

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17
Q

Objectives of governments

A

Reducing DWL by responding to market failure of public goods,external costs and benefits and imperfect competition

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18
Q

Objectives of producers

A

Maximise profits
Allocate resources
Social responsibility

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19
Q

Allocative efficiency

A

Optimal distribution of goods and services taking into account different consumer preferences

P=mc

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20
Q

Incentives within a economy

A

Quality incentives
Price incentives
Tax incentives

21
Q

Joint demand

A

Ink and printers, goods that complement each other in demand

22
Q

Composite demand

A

Exists where goods or services have more than one use.

An increase demand for one product leads to fall in supply of another

E.g oil for plastic demand increases leading to decrease in supply of oil for petrol

23
Q

Competitve demand

A

When demand increases for one good or service decreasing demand for another

Demand for rail increases leading to fall in demand for cars

24
Q

Joint supply

A

When two goods are produced together from the same origin

Beef and leather- cow being slaughtered can increase supply of both

25
Q

Competitve supply

A

Alternative products a firm could make with its resources

For example a farmer could choose to produce carrots or potatoes with its machinery

26
Q

Market supply

A

How much producers in a collective market are willing to supply and sell their goods and services at different prices over a given period

27
Q

Individual supply

A

How a single firm is willing to price and quantify their goods over a given time period

28
Q

Define rationality

A

When agents make a choice they choose the option that seeks greatest utility

29
Q

Characteristics of a normative statement

A

Subjective
Based on value judgement
Cannot be tested true or false
Ought, should and fair

30
Q

Positive statement characteristics

A

Can be proven
What the economy is

31
Q

Trade off define

A

Weighing of two options to choose what you want

32
Q

Opportunity cost evaluate

A

Pros - recognising opportunity cost can allow you to make better decisions and reduce scarcity of choices

Cons- difficult to identify OC as benefits of goods can’t easily be quantified

33
Q

Specialisation

A

Concentration of production on narrow range of goods and services

Pros
Wider range - choice
AE
Productivity
Quality improvements

Cons
Finite resources
Changes in tastes

34
Q

Accounting profit

A

Revenue minus the explicit costs like a depreciation

35
Q

Public good

A

Non excludability
Non rivalry
Zero mc

36
Q

Private good characteristics

A

Excludable
Rivalry
Opportunity cost generated

37
Q

Merit goods are typically

A

Under consumed
Underproduced

Contain positive externalities

Demerit the opposite

38
Q

Principal agent problem

A

Agent is expected to act in the best interests of a principal but does not

For example a shareholder may want to maximise profits however the manager doesn’t share the same idea

39
Q

Difference between a shift and a movement along a demand curve

A

Shift - factors other than price change the overall demand for the product

Movement- price of product changes
Extension- increase in demand
Contraction- decrease in demand

40
Q

Economic good

A

A good with some benefit to society and an opportunity cost

41
Q

Moral hazard

A

Situation where a a firm or individual takes a risk knowing that someone bears the cost if it goes badly

42
Q

Free goods

A

Goods with zero opportunity cost such as air

43
Q

Evaluative points

A

Ceritus paribus
Short and long run
Elasticity
Business objectives

44
Q

Marginal cost

A

Change in total cost / change in quantity produced

45
Q

Cost calculations

A

AC=TC/ number of units
AVC= VC/ number of units

46
Q

DOL

A

Broken down of tasks upon specialisation

Pros
Higher productivity
Lower prices
Higher quality

Cons

Worker turnover - lower quality
Demotivation of workers

47
Q

Marginal revenue

A

Change in revenue / change in output

48
Q

Causes to shift supply

A

Changes in technology
Natural events
Changes in price to produce

49
Q

Causes of shifts in demand

A

Income
Trends or tastes
Price of substitutes

Microeconomics (12 decks)

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