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Economics > Meaning > Flashcards

Meaning Flashcards

1
Q

Basic economic problem

A

Working out how to allocate limited resources as effectively as possible to satisfy people’s unlimited wants and needs

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2
Q

Foundation of economic decisions

A

What goods/services produced
How the goods/services are produced
Who we produce the goods/services for

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3
Q

Economic agents

A

Producers
Consumers
Governments eshtablish rules for economies

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4
Q

What does the renewablility of resources depend on

A

Rate of extraction

If the rate we consume is larger than the natural rate of production

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5
Q

Ppf

A

Shows economy at its maximum productive potential

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6
Q

Allocative efficiency

A

When a specific combination of goods is efficient for society

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7
Q

If there is a fixed amount of resources what does shifts along the PPF represent

A

Reallocation of resources

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8
Q

Division of labour

A

Dividing the workforce and allocating specific individuals to specific tasks

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9
Q

Criteris paribus

A

Isolating the relationship between 2 variables , all other influencing factors kept constant
All other things remaining equal

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10
Q

Positive statements

A

Objective statements
Facts
Can be tested

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11
Q

Normative statement

A

Subjective statements

Can carry VALUE JUDGEMENTS

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12
Q

Value judgement

A

Subjective statement of opinion

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13
Q

Functions of money

A

Medium of exchange
Measure of value
Store of value
Method of deferred payment

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14
Q

Advantages of specialisation

A

Higher output - quality can be improved
Competition and lower prices
Increased competition acts as an incentive to minimise costs

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15
Q

Disadvantage of specialisation

A

Unrewarding repetitive work can bring quality down
Problem of high worker turnover for businesses
May find it hard to do alternative jobs - structural unemployment

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16
Q

Asymmetric information

A

Inaccurate information

Occurs when one party has more information than the other in a transaction

17
Q

Bounded rationality

A

Limit on decision making

18
Q

How are individuals influenced

A

Rules of thumb - useful tools that help an individual

Availability bias - judgements made about the probability of the event occurring

19
Q

Choice architecture

A

Individuals choice influenced by adapting the way choice is presented

20
Q

Mandated choices

A

Having to make a decision

21
Q

Anchoring

A

Placing too much emphasis on one piece of info

22
Q

Habitual behaviour

A

Doing the same thing again and again

23
Q

Framing

A

Context in which info is presented

24
Q

Nudges

A

Alternatives that are easier to choose from

25
Q

Demand

A

Quantity of goods/services that consumers are willing at able to buy at a given price and particular time

26
Q

Substitution effect

A

Fall in price
Cheaper than other goods
Consumers increase demand
Reduce demand for more expensive good

27
Q

Income effect

A

Assuming fixed level of income
Price falls
Amount consumers buy with their income increases
Demand increases

28
Q

Price elasticity or demand

A

How the quantity demanded for a good response to a change in price

29
Q

Perfectly elastic demand

A

Increase in price means demand will fall to 0

30
Q

Unit elasticity

A

PED = +-1

Size of percentage change in price equal of percentage change in demand

31
Q

Income elasticity of demand

A

Shows how demand for a good changes with change in real income

32
Q

Cross elasticity is demand

A

Measure of how the quantity demanded of an good responds to a change in price of another

33
Q

Markets

A

Method for allocating scare resources. Doesn’t have to be a place or involve exchange of physical objects

34
Q

Tax

A

compulsory contribution to state revenue, levied by the government

35
Q

Indirect tax

A

Taxes on goods eg VAT , increases firms cost of production but can be transferred.

36
Q

Direct tax

A

taxes on income, profits and wealth, paid directly by the bearer

Economics (6 decks)

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