micro Flashcards
Allocative efficiency
Producing the mix of goods and services that society values the most.
Buffer stock
An intervention system that aims to stabilise prices
Capital
Productive resources
Ceteris Paribus
All other factors remaining constant
Composite demand
When a good is demanded for more than one distinct purpose
Cross elasticity of demand
When the responsiveness of quantity demanded of one good to the change in price of another good
Demand
The amount of 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 the consumers than they realise.
Depreciation
The rate at which capital loses value over time.
Derived demand
When the demand for a product or factor of production comes from the demand for another product
Diseconomies of scale
Where an increase in the scale of production leads to an increase in average total costs for firms
Disequilibrium
When supply in a market does not meet the demand
Division of labour
Breaking the production process down into a sequence of tasks, with workers assigned to particular tasks
Economic goods
Goods that are scarce and therefore have an opportunity cost in consumption
Economic welfare
The benefit or satisfaction an individual gets from the allocation in average total costs for firms
Economies of scale
Where an increase in scale of production leads to a reduction in average total costs for firms
Effective demand
Demand backed up by the ability to pay for a good or service
Enterprise
The risk taking role of business owners in combining other factors of production
Equilibrium
The market situation where planned demand equals planned supply and there is no tendency for change
Excess demand
When the demand is greater than supply at a given price
Excess supply
When the supply is greater than demand at a given price
Externalities
Spill over effects to third parties of a market transaction
Factors of production
capital, enterprise, land, labour
Factor market
The market for a factor of production that makes other goods or services
fixed costs
Costs of production that do not vary with output
Free goods
Goods that have no opportunity costs in consumption
Free market economy
One in which there is very little government intervention in the allocation of resources
Free-rider problem
Where some consumers benefit from other consumers purchasing a good, especially in the case of public goods
Government failure
When government intervention to correct market failure does not improve the allocation of recourses
Incidence of tax
The proportion of tax passed on to the consumer
Income elasticity of demand
The responsiveness of quantity demanded to a change in income
Indirect tax
A tax on spending
Inferior goods
Goods or services that will see a fall in demand when income increases
Joint supply
When the productive of one good results in the production of another
Market
A situation where buyers are in contact with sellers of a good or service
Market failure
When the free market fails to achieve an efficient or equitable allocation of resources
Maximum price
A price ceiling above which the price of a good or service is not allowed to increase
Merit good
A good or service that would be under-consumed in a free market as individuals do not fully perceive the benefits from consumption
Microeconomics
Study of individual markets
Minimum price
A price floor below which the price of a good or service is not allowed to decrease
Mixed economy
An economic system where resources are allocated by state planning and market forces
Monopoly
A market structure dominated by a single seller of a good or service
Negative externalities
Costs imposed on a third party not involved with consumption or the production of the good
Normal good
A good or service that will see an increase in demand as income rises
Normative statements
Opinions that require value judgements to be made
Oligopoly
A market structure where a few large firms dominate
Opportunity cost
The next best alternative given up when an economic decision is made
Partial market failure
Where the free market provides a product but with a misallocation of resources
Perfect competition
An extremely competitive market structure
Pollution permit
A permit sold to firms by the government, allowing them to pollute up to a certain limit
Positive externality
A beneficial spillover effect to third parties of a market transaction
Positive statements
Statements that can be tested against data to be declared either true of false
Price elasticity of demand
The responsiveness of quantity demanded to a change in price
price elasticity of supply
The responsiveness of quantity supplied to a change in price
Private good
A good that is both excludable and rival in consumption
PPC?PPB
Production possibility curve/boundary- a diagram showing the maximum possible output that can be achieved given a fixed amount of resources.
Production efficiency
When a firm operates at minimum average total costs
Public good
A good that possesses the characteristics of non excludability and non- rivalry in consumption
Quasi-public good
A good that has some of the characteristics of a public good, but is not completely non- excludable or non- rival
Scarcity
The economic problem- when Society’s wants exceed the amount available of the factors of production
Specialisation
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
Substitutes
Goods that can be used as alternatives to other goods, e.g butter and margarine
Supply
The quantity of a product offered for sale by firms at a given price
Variable costs
Costs of production that vary with output
capital goods
Any tangible assets that an organization uses to produce goods or services such as office buildings, equipment and machinery. Consumer goods are the end result of this production process.
rationing
Prices serve to ration scarce resources when demand in a market outstrips supply.
signalling
Prices adjust to demonstrate where resources are required, and where they are not
incentive
Through their choices consumers send information to producers about the changing nature of needs and wants
price mechanism
The interaction of buyers and sellers in free markets enables goods, services, and resources to be allocated prices.
income tax
tax levied directly on personal income
profit
When total income or revenue of a firm is greater than total costs
complement
A product generally consumed together with another e.g fish and chips
productivity
A measure of efficiency, typically expressed as output per person per hour
