Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

IB Economics HL > Micro > Flashcards

Micro Flashcards

1
Q

Market

A

a place where buyers and sellers meet.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Demand

A

the quantity, of a good or service, bought at a given price.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Ceteris Paribus

A

latin for everything else (all other variables) remains equal (constant)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Income

A

the amount an individual or firm earns over a period of time (a year or month).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Substitute

A

a good or service bought as an alternative.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Complement

A

a good or service bought together with another good or service but paid for separately

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Supply

A

the quantity of a good or service that a firm is willing to sell at a given price.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Land

A

any raw material

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Labour

A

people paid to work

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Capital

A

something man-made used in production

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Entrepreneur

A

a person that combines the other resources in production

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Rent

A

the payment from land

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Wage

A

the payment for labour

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Interest

A

the payment from capital

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Profit

A

the payment to entrepreneurs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Tax

A

an additional amount (as cost or from income) that is paid to the government

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Subsidy

A

an additional amount that is paid by the government (to reduce costs)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Opportunity cost

A

the difference between the best and next best alternatives

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Consumer surplus

A

the amount some consumers would have been willing to pay but don’t have to as there is a single market price (area below the demand curve and above the equilibrium price)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Producer surplus

A

the amount some producers would have been willing to sell for but don’t have to as there is a single market price (area above the supply curve and below the equilibrium price)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Allocative efficiency

A

where the consumer and producer surplus, welfare of society, is maximised; the equilibrium where supply equals demand (MSC = MSB or P = MC)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Price Elasticity of Demand (PED)

A

the responsiveness of the quantity demanded to a change in price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Cross Price Elasticity of Demand (XED)

A

the responsiveness of the quantity demanded of one good to a change in price of another (related) good

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Income Elasticity of Demand (YED)

A

the responsiveness of the quantity demanded to a change in income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Inferior good

A

a good for which demand falls when income rises

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Normal good

A

a good for which demand rises when income rises

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Price Elasticity of Supply (PES)

A

the responsiveness of the quantity supplied to a change in price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Primary sector

A

the supply of land

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Secondary (manufacturing) sector

A

the supply of goods

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Tertiary (service) sector

A

the supply of services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Indirect tax

A

a tax on a good or service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Specific tax

A

a tax of a fixed amount on a good or service that shifts the supply curve to the left and parallel to the original

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Ad valorem tax

A

(latin: with value) is a tax as a percentage of the price that changes the gradient or slope of the supply curve as it shifts to the left.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Maximum (ceiling) price

A

a price set below the equilibrium

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Minimum (floor) price

A

a price set above the equilibrium price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

Parallel (or black) markets

A

markets that are illegal.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

Stakeholder

A

anyone with an interest in the market; consumers producers, government, environmentalists, banks etc.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

Welfare loss

A

the loss of consumer and producer surplus that results from taxation, subsidy, price control or externality

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

Market failure

A

when a market fails to produce in the best interests of society; not at allocative efficiency (over-production/allocation or under-production/allocation)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

Negative externality of consumption

A

an additional cost occurring as a result of consumption that has an effect on a third party (is not paid for by consumers) and leaves society worse off, resulting in over-consumption

41
Q

Negative externality of production

A

an additional cost occurring as a result of production that has an effect on a third party (is not paid for by firms in the production process) and leaves society worse off, resulting in over-production `

42
Q

Positive externality of consumption

A

an additional benefit occurring as a result of consumption that is received by a third party (not paid for or gained by consumers), leaving society better off and resulting in under-consumption

43
Q

Positive externality of production

A

an additional benefit occurring as a result of production that is received by a third part (not by firms), leaving society better off an resulting in under-production

44
Q

Public good

A

a good that is non-rivalrous and non-excludable

45
Q

Non-rivalrous

A

when one person benefiting from or using a good or service doesn’t stop others from doing so

46
Q

Non-excludable

A

when once a good or service is provided it is no longer possible to exclude and stop people benefiting from it

47
Q

Merit good

A

a good that gives positive externalities of consumption

48
Q

Demerit good

A

a good that gives negative externalities of consumption

49
Q

Common access resources

A

resources, land, that is non-excludable and so over-exploited creating a welfare loss and leaving society worse off.

50
Q

Incidence of taxation

A

the amount of the total tax revenue that is paid for by the consumers and/or producers.

51
Q

Asymmetric information

A

when either the buyer or seller has more information than the other and so can make a large profit.

52
Q

Monopoly

A

when a firm has some control over the price; and sp society experiences a welfare loss.

53
Q

Short run

A

when at least one factor of production is fixed.

54
Q

Long run

A

when all factors of production vary

55
Q

Total product

A

the quantity produced as more labour is added to a production process.

56
Q

Marginal product

A

the additional production that an additional unit of labour produces; the change in total product divided by the change in labour (first derivative of total product).

57
Q

Diminishing marginal returns

A

the fact that the marginal product falls as production increases; resulting in increased cost of production (and an upward sloping supply curve).

58
Q

Economic cost

A

the cost of land, labour and capital in the production process.

59
Q

Explicit cost

A

the actual cost of production; the cost of using labour, capital and land.

60
Q

Implicit cost

A

the opportunity cost of using factors of production that a firm already has; this always includes entrepreneurship (may include capital).

61
Q

Fixed cost

A

the cost of the factor(s) of production that are fixed in the short run (usually the cost of capital).

62
Q

Variable cost

A

the factor(s) of production that are not fixed in the short run (usually the cost of land and labour).

63
Q

Total cost

A

the cost of land, labour and capital at any given level of production

64
Q

Average cost

A

the total cost per unit of production; the total cost divided by the quantity produced.

65
Q

Marginal cost

A

the additional cost of producing one more (the last) unit of production; the change in total cost divided by the change in production (the first derivative of the total cost - the firm’s supply function)

66
Q

Returns to scale

A

the relationship between the level of production and factors of production in the long run.

67
Q

Increasing returns to scale

A

when an increase in all factors of production increases the level of production by a greater proportion in the long run.

68
Q

Constant returns to scale

A

when an increase in all factors of production increases the level of production by the same proportion in the long run.

69
Q

Diminishing returns to scale

A

when an increase in all factors of production increases the level of production by a lesser proportion in the long run.

70
Q

Economies of scale

A

when the costs of production fall as production increases in the long run; very similar to increasing returns to scale

71
Q

Dis-economies of scale

A

when the costs of production rise as production increases in the long run; very similar to diminishing returns to scale

72
Q

Total revenue

A

the income of the firm from sales; the total production sold (quantity multiplied by price).

73
Q

Average revenue

A

the total revenue per unit sold; total revenue divided by production (price has the same value as average revenue).

74
Q

Marginal revenue

A

the additional revenue gained from selling one more unit; the change in total revenue divided by the change in production (the first derivative of total revenue and twice the slope of (a straight line) average revenue).

75
Q

Profit

A

when total revenue is greater than total cost.

76
Q

Normal profit

A

the minimum amount of profit necessary to keep the entrepreneur going and so the firm operating; covering the explicit costs (of land, labour and capital) and implicit cost (of entrepreneurship).

77
Q

Economic profit (abnormal or supernormal)

A

any profit greater than normal profit.

78
Q

Loss

A

when total revenue is less than total cost.

79
Q

Profit maximisation

A

when a firm aims to make the greatest difference between total revenue and total cost; the level of output where marginal cost equals marginal revenue (MC = MR).

80
Q

Revenue maximisation

A

when a firm aims to make the greatest total revenue possible;operating where marginal revenue is zero.

81
Q

Satisficing

A

when a firm aims make enough profit to satisfy shareholders without actually maximising profit.

82
Q

Corporate social responsibility

A

the responsibility that a firm has towards society as a whole (the environment, employees and the general public) rather than to shareholders

83
Q

Perfect competition

A

when many small firms operate in a market with many consumers so the firms are price takers and there are no externalities, no economies of scale, homogenous products and perfect knowledge.

84
Q

Price taker

A

when a firm has no control over the price in a market and faces a perfectly elastic average revenue (or demand) function.

85
Q

Break-even price

A

the price at which a firm makes zero profit; total revenue equals total cost (quantity where average revenue equals average cost: AR = AC).

86
Q

Shut-down price

A

the price at which a firm can only pay for variable costs: total revenue equals variable costs (quantity where average variable cost equals average revenue: AVC = AR)

87
Q

Allocative efficiency

A

the quantity at which price equals marginal cost: price is the same value as average revenue and the average revenue function looks the same as the demand function while marginal cost is (when sloping upwards) the firm’s supply function so allocative efficiency is where supply equals demand and producer and consumer surplus are maximised or where MSB = MSC (with externalities)`

88
Q

Productive efficiency

A

when a firm is using the minimum resources in production; the lowest level of the average cost or where average cost equals marginal cost (AC = MC).

89
Q

Monopoly

A

when one firm dominates a market with no close substitutes and high barriers to entry

90
Q

Barriers to entry

A

the cost (research and development, marketing etc.) or other barriers (legal barriers) that stop competing firms from entering a market.

91
Q

Natural monopoly

A

when one firm is more efficient than two in a market so only one will actually operate

92
Q

Monopolistic competition

A

when there are many firms competing with many consumers but the products are not homogenous and there can be externalities

93
Q

Non-price competition

A

when firms compete on quality or design of a product rather than price; the quality and design of a smartphone rather than the price.

94
Q

Oligopoly

A

when a few firms dominate a market.

95
Q

Concentration ratio

A

measures the market share that a given number of firms has; a perfect monopoly is when 1 firm has 100% of the market and in an oligopoly the largest 5 firms may have 85% of the market.

96
Q

Game theory

A

when firms use a matrix theory (maths) in order to take into account other firms’ operations and maximise profits.

97
Q

Formal (open) collusion

A

when firms in an oligopoly meet to set prices or levels of production and so control the market like a monopoly: OPEC

98
Q

Informal (tacit) collusion

A

when firms follow unwritten rules (price leadership of a dominant firm) in order to set prices or levels of production and so operate as a monopoly

99
Q

Price discrimination

A

when a firm sells exactly the same product at different prices to different consumers

IB Economics HL (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions