Micro 1 Flashcards
(119 cards)
Allocative efficiency
When an economy’s factors of production are used to produce the combination of g and s that maximises society’s welfare
Allocative function
The function of prices that acts to divert resources to where returns can be maximised
Asymmetric info
A source of info failure where one economic agent knows more than another , giving them more power in a market transaction
Average revenue
Total revenue divided by units of output.
Average total cost
Total costs of production divided by the number of units of output
Barrier to entry
Feature of a market that makes it difficult or impossible for new firms to enter
Capital
Productive resources
Ceteris paribus
All other factors remaining constant
Command economy
An economic system where all decisions about resource allocation are made centrally by the state
Competitive market
A situation where there is a large number of potential buyers and sellers with abundant info about the market
Complement
A product generally consumed together with another e.g fish and chips
Complete market failure
When the free market fails to create a market for a good or service - missing market
Composite demand
When a good is demanded for more than one distinct purpose
Concentrated market
A market dominated by a small number of firms
Concentration ratio
A measurement of how concentrated a market is -
Conditions of demand
Factors other than price of a product that lead to a change in the position of the demand curve
Conditions of supply
Factors other than price of a product that lead to a change in the position of the supply curve
Cross elasticity of demand
The responsiveness of quantity demanded of one good to the change in price of another good
Demand
The amount of a product that consumers are willing and able to buy at each given price level
Demerit good
A good that would be over consumed in a free market as it brings less overall benefit to consumers than they realise
Derived demand
When the demand for a product or factor of production comes from the demand for another product
Diseconomies of scale
When an increase in the scale of production leads to an increase in average total costs for firms
Disequilibrium
When supply in a market doesn’t equal demand
Division of labour
Breaking the production process down into a sequence of tasks, with workers assigned to particular task