market terms Flashcards
fixed cost
cost of production which, in the short run, does not change with output
economy of scale
a cost saving generated through changes to the ‘productive process’ as the scale of production and the level of output increases
capital
man made aids to production
variable cost
cost of production which changes the amount produced even in the short run
production possibility curve
the combination of two goods which an economy is capable of producing using all its resources in the most efficient way
positive statements
statement that can be scientifically tested if its correct or incorrect
long run
the long run time period which no factor of production are fixed and in which all the factors of production can be varied
normative statements
an opinion based statement
factors of production
capital, enterprise, land, labour
allocative efficiency
where resources are used to produce what consumers actually want to buy
6 characteristics of a perfect competition market
no barriers to exit and entry homogeneous products many buyers and firms in the market nobody can influence price perfect information buyers and sellers are able to buy and sell
price maker
a firm that determines and effects the price eg: monopoly
short run economics and long run economics
short run - at least one factor of production is fixed and can not vary
long run - no factors of production is fixed and all factors of production can vary.
price elasticity of demand formula
PED = % change in quantity demand / % change in price
what is a concentration ratio
the % of shares the top few large firms own in a market. Illustrates the power of the bug firms
