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Micro > Micro > Flashcards

Micro Flashcards

0
Q

Consumer surplus

A

The difference between what the consumer is willing to pay for a good and what they actually pay.

The triangle above the price.

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1
Q

PPf

A

The maximum output combinations of two goods an economy can achieve when all its resources are fully employed

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2
Q

Producer surplus

A

The difference in the price that the producer is willing to supply the good at and the price they actually get for.

The triangle below the price

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3
Q

PED

A

% change in QD / % change in P

Always negative

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4
Q

YED<0

A

Negative income elasticity

They are inferior goods

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5
Q

Inferior goods

A

As income increase, the demand for the good decreases.

Negative YED

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6
Q

YED=0

A

Zero income elasticity

Demand remains constant as income increases.

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7
Q

YED>1

A

Income elastic
An Engels curve
A1%change in income causes greater than1%change in QD.

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8
Q

An Engels curve

A

Shows the relationship between income and QD. (In YED)

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9
Q

Positive statement

A

It’s a statement of fact. It can be tested as true or false. It’s an objective statement.

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10
Q

Normative statement

A

The value of judgement. It cannot be tested as true or false.
Subjective statement

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11
Q

Indirect tax

A

A charge imposed on your expenditure which is compulsory to pay.
Eg VAT

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12
Q

Effective demand

A

Desire to pay
Ability to pay
Willingness to pay

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13
Q

Sustainable development

A

Development which meets the needs of the present without compromising the ability of future enervation to meet their own needs.

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14
Q

Division of labour

A

A process where the production procedure is broken down into a sequence of stages and workers are put in a particular work .

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15
Q

Price mechanism

A

The use of demand and supply to allocate resources.

It’s used ration out goods

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16
Q

Mixed economy

A

There’s a mix of private and public sectors which allocates resources within an economy.

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17
Q

(Free) Market economy

A

Where resources are allocated by the price mechanism and there’s no government intervention.

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18
Q

Basic economic problems

A

Unlimited resources and wants.

Have to make a choice of what, how and to whom to produce.

19
Q

Equilibrium price

A

Where demand equals supply

20
Q

Causes of shift in demand

A

Change in income
Change in the price of the substitute
Change in the price of the complementary goods
Change in taste/advertisement

21
Q

Causes of the shifts in supply

A 
Change in costs of production 
Goods in joint supply 
Indirect tax ( increase = s decreases )
Subsidies ( increase = s to the left )
Random shocks 
Price expectation 
Substitutes in supply
22
Q

PED>1 Elastic

A

P increase TR decrease
P decrease TR increase
More than proportionate

23
Q

PED<1 Inelastic

A

P decreases, so does TR
P increases, so does TR
Less than proportionate

24
Q

PED = 1

A

TR doesn’t change whether p increases or decreases

25
Q

PED = 0

A

Demand stays the same despite the changes in the price.

26
Q

0 < YED < 1

A

A 1% change in income causes a change of less than 1% in quantity demanded.
Eg necessity goods

27
Q

XED positive

A

Substitute goods

Rise in price of good A increases the demand in good B.

28
Q

XED negative

A

The complement goods

Rise in price of good A decreases the demand of good B.

29
Q

XED zero

A

Independent goods

30
Q

PES > 1 Elastic

A

1% fall in price causes bigger than 1% fall in QS.

31
Q

PES < 1 Inelastic

A

1% fall in price causes smaller than 1% fall in QS.

32
Q

PES = 1 Unity

A

1% fall in price causes 1% fall in QS.

33
Q

Evaluation

A
  • prioritisation- which factors are most important and why?
  • critical comment on the point you made.
  • short run/long run effects.
  • comment on effectiveness of the policy.
34
Q

Sustainable resources

A

Renewable resources

35
Q

Unsustainable resources

A

Non-renewable resources

36
Q

Normal goods

A

Increase in income causes increase in demand because it’s a necessity good

37
Q

Determinants of PED

A
  • more substitutes and closer they are, greater the PED
  • greater the proportion of income, greater the PED
  • necessity goods are Inelastic
  • luxury goods are elastic
  • greater the durability, greater the PED.
  • habit forming=Inelastic
  • time period
38
Q

National minimum wage

A

The legal minimum that employers must pay to the workers.

39
Q

Asymmetric information

A

Consumers have less market knowledge than producers.

40
Q

Percentage change

A

(Change/original) times 100

41
Q

External benefits

A

Positive spill over effect
Positive third party effect
PMC=SMC

42
Q

Private optimum level

A

PMC=PMB

43
Q

Socially optimum level

A

PMC=SMB

44
Q

Specialisation

A

When we concentrate on a particular product or task.

Micro (9 decks)

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