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Economics definitions > Micro > Flashcards

Micro Flashcards

1
Q

Demand

A

The quantity of a good or service consumers are willing and able to buy at a given price in a given period of time.

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2
Q

Market Demand

A

The total quantity demanded in a market

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3
Q

Condition of demand

A

A determinant of demand, other than its price that fixes the position of a demand curve

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4
Q

Inferior good

A

A good for which demand decreases as income rises

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5
Q

Normal good

A

A good for which demand decreases as income rises

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6
Q

Supply

A

The quantity of a good or service that firms plan to sell at given prices in a given period of time

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7
Q

Market supply

A

The quantity of a good or service that all the firms in the market plan to sell

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8
Q

Profit

A

Total revenue minus total cost

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9
Q

Condition of supply

A

A determinant of supply, other than a good’s price, that fixes the position of the supply curve

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10
Q

Ad valorem tax

A

A percentage expenditure tax e.g. VAT

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11
Q

Expenditure tax

A

A tax levied by the government on spending by consumers. The firm pay the government, consumers pay indirectly via price rise

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12
Q

Unit/specific tax

A

A tax levied on a particular unit of a good, irrespective of its price

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13
Q

Subsidy

A

Money given to firms to offset the cost of production

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14
Q

Competitive market

A

A market with a large number of buyers and sellers possessing good market info and are easily able to enter or leave the market

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15
Q

Market equilibrium

A

When planned demand equals planned supply

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16
Q

Excess supply

A

When firms wish to sell more than consumers wish to buy at a price above the equilibrium price

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17
Q

Market disequilibrium

A

When a market fails to clear. Plans of consumer and suppliers are inconsistent with each other

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18
Q

Excess demand

A

When consumers wish to buy more than firms wish to sell, the the price below the equilibrium price

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19
Q

Incentive function

A

Price creates incentives for consumers and firms to behave in certain ways

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20
Q

Rationing or allocative function

A

Prices allocate scarce resources between competing uses

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21
Q

Signalling function

A

Prices provide information to buyers and sellers

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22
Q

Elasticity

A

The proportionate responsiveness of one variable to an intial proportionate change in another

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23
Q

Price elasticity of demand

A

The proportionate response of demand in response to a proportionate change in price

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24
Q

Price elasticity of supply

A

The proportionate response of supply in response to a proportionate change in price

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25
Q

Cross elasticity of demand

A

The proportionate change in demand for one good in response to a change in price of another

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26
Q

Income elasticity of demand

A

The proportionate change in demand in response to a proportionate change in income

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27
Q

Speculation

A

The belief price will either fall or rise in the future, results in capital gains or losses

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28
Q

Production

A

Conversion of inputs into outputs

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29
Q

Productivity

A

Output per unit of input. e.g. labour

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30
Q

Division of labour

A

The concept that different workers should be made to perform different tasks. This allows for specialization.

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31
Q

Specialisation

A

A worker performing one or few tasks.

32
Q

Exchange

A

The changing of goods, or trade. Money is used for a medium for exchange

33
Q

Average/unit cost

A

The cost per unit of input

34
Q

Productive efficiency

A

Occurs when a firm minimises its average cost to the lowest point on the average cost curve

35
Q

Economy of Scale

A

The falling unit cost as a firm increases its output

36
Q

Diseconomy of scale

A

Rising average cost as a firm’s output increases

37
Q

Market failure

A

A market completely or partially failing to provide the wrong quantity of a good, leading to a misallocation of resources.

38
Q

Equity

A

Fairness or justness

39
Q

Private good

A

A good such as an orange which is both excludable and rival

40
Q

Public good

A

A good which is both non-excludable and non-rival. Such as a radio programme

41
Q

Free rider

A

Somebody who benefits from a good without paying for it.

42
Q

Good

A

Something that yields utility

43
Q

Bad

A

Something that yields disutility

44
Q

Externality

A

A benefit or cost ‘dumped’ on third parties outside the transaction.

45
Q

Margin

A

Refers to the last unit of a good.

46
Q

Marginal benefit

A

The benefit from the last unit of a good

47
Q

Marginal cost

A

The cost resulting from the last unit of a good

48
Q

Social cost

A

The total cost of an activity

49
Q

Private benefit maximisation

A

MPC=MPB

50
Q

Social benefit

A

The total benefit of an activity

51
Q

Social benefit maximisation

A

MSC-=MSB

52
Q

Merit good

A

A good where the social benefits of consumption are greater than the private benefits. e.g. healthcare

53
Q

Demerit good

A

A good, where the social cost of consumption exceed the private cost. e.g. Tabacco

54
Q

Normative statement

A

A statement of opinion based on a value judgement

55
Q

Positive statement

A

A statement of fact, or one that can be scientifically tested

56
Q

Monopoly

A

A market dominated by one firm

57
Q

Pure monopoly

A

One firm only in a market

58
Q

Natural Monopoly

A

A market in which there is only room for one firm benefiting from full economies of scales

59
Q

Utility industry

A

A industry such as post, which delivers its service to millions of separate customers

60
Q

Immobility of labour

A

The inability of labour to move from one job to another. Geographic, occupational

61
Q

Income

A

The flow of money received e.g. wage

62
Q

Wealth

A

The total stock of assets that a person owns

63
Q

Regulation

A

The imposition of rules, controls and constraints which restrict the freedom of economic action in a market.

64
Q

Taxation

A

A compulsory levy placed by the government to pay for its activities. Can be placed on things like demerit goods.

65
Q

Nationalisation

A

The state taking over firms previously in the private sector

66
Q

Privatisation

A

The state selling nationalised firms into the private sector

67
Q

Fiscal policy

A

Use of taxation and spending to achieve policy objectives

68
Q

Government transfers

A

The payment of money to an individual without receiving any service in return

69
Q

Progressive taxation

A

A tax imposed where people pay more as income rises

70
Q

Price ceiling

A

A price above which it is illegal to trade. Maximum legal prices, create excess demand

71
Q

Price floor

A

A price which below which it is illegal to trade. Creates excess supply

72
Q

Secondary market

A

A market which comes into existence when a primary market can’t function properly

73
Q

Buffer stock

A

A store of an commodity or agricultural good, added to market in a shortage and removed in excess

74
Q

Intervention price

A

A price at which a buffer stock agency will either buy or sell a good.

75
Q

Government failure

A

When government intervention is either wasteful or ineffective.

Economics definitions (4 decks)

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