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Year 1 Micro > Micro 1 > Flashcards

Micro 1 Flashcards

1
Q

Allocative efficiency

A

When an economy’s factors of production are used to produce the combination of g and s that maximises society’s welfare

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2
Q

Allocative function

A

The function of prices that acts to divert resources to where returns can be maximised

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3
Q

Asymmetric info

A

A source of info failure where one economic agent knows more than another , giving them more power in a market transaction

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4
Q

Average revenue

A

Total revenue divided by units of output.

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5
Q

Average total cost

A

Total costs of production divided by the number of units of output

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6
Q

Barrier to entry

A

Feature of a market that makes it difficult or impossible for new firms to enter

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7
Q

Capital

A

Productive resources

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8
Q

Ceteris paribus

A

All other factors remaining constant

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9
Q

Command economy

A

An economic system where all decisions about resource allocation are made centrally by the state

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10
Q

Competitive market

A

A situation where there is a large number of potential buyers and sellers with abundant info about the market

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11
Q

Complement

A

A product generally consumed together with another e.g fish and chips

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12
Q

Complete market failure

A

When the free market fails to create a market for a good or service - missing market

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13
Q

Composite demand

A

When a good is demanded for more than one distinct purpose

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14
Q

Concentrated market

A

A market dominated by a small number of firms

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15
Q

Concentration ratio

A

A measurement of how concentrated a market is -

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16
Q

Conditions of demand

A

Factors other than price of a product that lead to a change in the position of the demand curve

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17
Q

Conditions of supply

A

Factors other than price of a product that lead to a change in the position of the supply curve

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18
Q

Cross elasticity of demand

A

The responsiveness of quantity demanded of one good to the change in price of another good

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19
Q

Demand

A

The amount of a product that consumers are willing and able to buy at each given price level

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20
Q

Demerit good

A

A good that would be over consumed in a free market as it brings less overall benefit to consumers than they realise

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21
Q

Derived demand

A

When the demand for a product or factor of production comes from the demand for another product

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22
Q

Diseconomies of scale

A

When an increase in the scale of production leads to an increase in average total costs for firms

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23
Q

Disequilibrium

A

When supply in a market doesn’t equal demand

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24
Q

Division of labour

A

Breaking the production process down into a sequence of tasks, with workers assigned to particular task

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25
Q

Dynamic efficiency

A

Improvement in productive efficiency over time

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26
Q

Economic good

A

Goods that are scares and therefore have an opportunity cost in consumption

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27
Q

Economic problem

A

Scarce economic resources compared with society’s unlimited wants

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28
Q

Economic welfare

A

The benefit or satisfaction an individual gets from the allocation of resources, also the standard of living or general wellbeing of people in society

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29
Q

Economies of scale

A

Where an increase in the scale of production leads to reductions in average total costs for firms

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30
Q

Effective demand

A

Demand backed up by the ability to pay for the good or service

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31
Q

Enterprise

A

The risk taking role of business owners in combining other factors of production

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32
Q

Equilibrium

A

The market situation where planned demand of consumers equals the planned supply of firms

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33
Q

Equilibrium price

A

The price at which the planned demand of consumers equals the planned supply of firms

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34
Q

Equity

A

The notion of fairness in society

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35
Q

Exchange

A

Where one thing is traded for something else

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36
Q

External economies of scale

A

Reductions in long run average total costs arising from growth of the industry in which the firm operates

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37
Q

Externalities

A

Spillover effects third parties of a market transaction

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38
Q

Factors of production

A

A country’s productive economic resources : capital equipment , enterprise , land and labour

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39
Q

Factor market

A

The market for a factor of production that makes a good or service

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40
Q

Fixed costs

A

Costs of production that do not vary with output

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41
Q

Free goods

A

Goods that have no opportunity cost in consumption e.g air

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42
Q

Free market economy

A

One in which there is very little gov intervention in the allocation of resources

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43
Q

Free rider problem

A

Where some consumers benefit from other consumers purchasing a good, especially in the case of public goods

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44
Q

Geographical immobility

A

A source of factor immobility that means workers have difficulty in moving locations where jobs are available e.g lack of affordable housing

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45
Q

Gov failure

A

When gov intervention to correct market failure does not improve the allocation of resources

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46
Q

Imperfect competition

A

Any market structure that isn’t perfect competition

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47
Q

Imperfect info

A

When economic agents do not know everything they need to know in order to make a fully informed decision

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48
Q

Incentive function

A

Prices create incentives for market participants to change their actions

49
Q

Incidence of tax

A

The proportion of tax passed on to the consumer

50
Q

Income elasticity of demand

A

The responsiveness of quantity demanded to a change in income

51
Q

Indirect tax

A

A tax on spending

52
Q

Inequitable distribution

A

When the way in which income and wealth are distributed in society is considered unfair

53
Q

Inferior goods

A

G or s that will see a fall in demand when income rises

54
Q

Info failure

A

A source of market failure where market participants do not have enough info to be able to make effective judgements about the optimum levels of consumption or production of a good

55
Q

Innovation

A

New products and production processes that are developed into marketable products

56
Q

Internal economies of scale

A

Reductions in long run average costs arising from growth of the firm

57
Q

Joint demand

A

Goods that tend to be demanded together I.e complementary goods

58
Q

Joint supply

A

When the production of one good results in the production of another

59
Q

Long run

A

A period of time over which all factors of production can be varied

60
Q

Market failure

A

When the free market fails to achieve an efficient or equitable allocation of resources

61
Q

Market structure

A

The no. And the size of firms within a market for a particular product

62
Q

Max price

A

A price ceiling above which the price of a good or service is not allowed to increase

63
Q

Merit good

A

A g or s that would be under consumed in a free market, as individuals do not fully perceive the benefits from consumption

64
Q

Microeconomics

A

Study of individual markets

65
Q

Minimum price

A

A price floor below which the price of a good or service is not allowed to decrease

66
Q

Mixed economy

A

An economic system where resources are allocated by state planning and market forces

67
Q

Monopoly

A

A market structure dominated by a single seller of a g or s

68
Q

Monopoly power

A

The power of a firm in a market to act as a price maker

69
Q

Natural monopoly

A

A market where a single firm can benefit from continuous economies of scale

70
Q

Need

A

Something which humans need to survive

71
Q

Negative externalities

A

Costs imposed on a third party not involved with the consumption or production of the good

72
Q

Non excludable

A

Where it is impossible to prevent non paying consumers from consuming a good

73
Q

Non price competition

A

Competition on the basis of product features rather than price, e.g. Quality, advertising or after sales service

74
Q

Non rival

A

Where one persons enjoyment of a good does not diminish another persons enjoyment of the good

75
Q

Normal good

A

A g or s that will see an increase in demand as income rises

76
Q

Normative statements

A

Opinions that require value judgements to be made

77
Q

Occupational immobility

A

A source of factor immobility that means workers find it difficult to move between occupations because they lack the desirable skills

78
Q

Oligopoly

A

A market structure where a few large firms dominate

79
Q

Opportunity cost

A

The next best alternative given up when an economic decision is made

80
Q

Partial market failure

A

Where the free market provides a product but with the misallocation of resources

81
Q

Perfect competition

A

An extremely competitive market structure that has a large number of buyers and sellers

82
Q

Pollution permit

A

A permit sold to firms by the gov allowing them to pollute up to a certain limit

83
Q

Positive externality

A

A beneficial spillover effect to third parties of a market transaction

84
Q

Positive statement

A

Statements that can be tested against data to be declared either true or false

85
Q

Price competition

A

Reducing the price of a g or s in order to make it more attractive than those of competitors

86
Q

Price elasticity of demand

A

The responsiveness of quantity demanded to a change in price

87
Q

Price elasticity of supply

A

The responsiveness of quantity supplied to a change in price

88
Q

Price maker

A

A firm with the power to set the ruling market price

89
Q

Price taker

A

A firm that is unable to influence the ruling market price and thus has to accept it

90
Q

Price war

A

Where firms in an industry repeatedly cut prices below those of competitors in order to win market share

91
Q

Private benefit

A

The benefit to an individual consumer involved in a market transaction

92
Q

Private cost

A

The cost to an individual producer involved in a market transaction

93
Q

Private good

A

A good that is both excludable and rival in consumption

94
Q

PPC

A

Production possibility curve - a diagram showing the maximum possible output that can be achieved given a fixed amount of resources

95
Q

Product differential

A

Using advertising or product design to make a product seem different from those of competitors

96
Q

Production

A

The total output of g and s produced by an individual, firm or country

97
Q

Productive efficiency

A

When a firm operates at minimum average total cost

98
Q

Productivity

A

A measure of efficiency- output per worker per hour

99
Q

Profit

A

When total income or revenue of a firm is greater than total costs

100
Q

Profit maximisation

A

When a firm seeks to make the largest difference between total revenue and total costs

101
Q

Public good

A

A good that posses the characteristics of non excludability and non rivalry in consumption

102
Q

Quasi public good

A

A good that has some of the characteristics of a public good but it is not completely non excludable or non rival

103
Q

Rationing function

A

Increasing prices rations demand to those most able to afford a product

104
Q

Regulation

A

Rules or laws used to control or restrict the actions of economic agents in order to reduce market failure

105
Q

Scarcity

A

The economic problem. Society’s wants exceed the amount available of the factors of production

106
Q

Short run

A

A period of time in which the availability of at least one factor of production is fixed

107
Q

Signalling function

A

Prices provide important information to market participants

108
Q

Social benefit

A

The total of private benefit plus external benefit of a market transaction

109
Q

Social cost

A

The total of private cost plus the external cost of a market transaction

110
Q

Specialisation

A

The production of a limited range of goods by an individual factor of production, firm or country, in co operation with others so that together a complete range of goods is produced

111
Q

Stakeholder

A

Any individual or group with an interest in how a business is run

112
Q

Static efficiency

A

Efficiency measures at a point in time, comprising productive efficiency and allocative efficiency

113
Q

Substitutes

A

Goods that can be used as alternatives to other goods e.g. Butter margarine

114
Q

Sunk costs

A

Costs that cannot easily be recovered if a firm is unsuccessful in a market And has to exit

115
Q

Supply

A

The quantity of a product that supplied at a given price

116
Q

Total cost

A

The addition of fixed costs and variable costs at a given level of output

117
Q

Total revenue

A

The money a firm receives from selling its output , calculated by price x quantity sold

118
Q

Variable costs

A

Costs of production that vary with output

119
Q

Want

A

Something which people feel improves their standard of living or general wellbeing in society

Year 1 Micro (3 decks)

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