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Economics A2 > Micro > Flashcards

Micro Flashcards

0
Q

What is economic welfare?

A

Refers to the benefit or satisfaction an individual or society gets from the allocation of resources.

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1
Q

What are goods and services?

A

Goods are tangible products that we can touch and services are non tangible products that we can’t touch

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2
Q

What is opportunity cost?

A

The next best alternative forgone when an economic decision is made.

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3
Q

What are economic goods?

A

Goods that are scarce and therefore have an opportunity cost

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4
Q

What are free goods?

A

Goods that have no opportunity cost, for example, air.

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5
Q

What is a factor market?

A

The market for the factors of production that make others goods and services such as labour or raw materials.

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6
Q

What are renewable resources?

A

Resources that are able to be replenished over time, whereas non-renewables such as oil are likely to run out.

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7
Q

What is profit?

A

When total income or revenue for a firm is greater than total costs.

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8
Q

What is a free market economy?

A

One in which there is very limited government involvement in providing goods and services. It’s main role is to ensure that the rules of the market are fair so that, for example, people cannot steal each other’s property.

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9
Q

What is the production possibility boundary?

A

The PPB indicates the maximum possible output that can be achieved given a fixed set of resources and technology in a particular time period.

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10
Q

What is productive efficiency?

A

When a firm operates at minimum average total cost, producing the maximum possible output from inputs into the production process.

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11
Q

What is allocative efficiency?

A

This is achieved in an economy when it is not possible to make anyone better off without making someone worse off, or you cannot produce more of one good without making less of another.

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12
Q

What is productivity?

A

A measure of efficiency, measuring the ratio of inputs to outputs, the most common measure is labour productivity, which is the output per worker.

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13
Q

What is human capital?

A

The skills, abilities, motivation and knowledge of labour. Improvements in human capital raise productivity and can shift the PPB to the right.

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14
Q

What is division of labour?

A

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

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15
Q

What is specialisation?

A

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

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16
Q

What are value judgements?

A

Statements or opinions expressed that are not testable or cannot be verified and depend very much on the views of the individual and the values they hold.

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17
Q

What are normative statements?

A

Opinions that require value judgements to be made.

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18
Q

What are positive statements?

A

Statements that can be tested against real-world data.

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19
Q

What is demand?

A

The amount that consumers are willing and able to buy at each given price level.

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20
Q

What is effective demand?

A

Demand supported by the ability to pay for a good and service.

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21
Q

What is market demand?

A

Total demand in a market for a good, the sum of all individuals’ demand, at each given price.

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22
Q

What is contraction in demand?

A

The falls in the quantity demanded caused by rises in prices.

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23
Q

What are extensions in demand?

A

Increases in demand caused by changes (falls) in price.

24
Q

What are normal goods?

A

Goods or services that will see an increase in demand when incomes rise.

25
Q

What are inferior goods?

A

Goods or services that will see demand fall when income rises.

26
Q

What are complementary products?

A

Goods that are consumed together, for example bread and butter, or DVDs and DVD players.

27
Q

What is composite demand?

A

A good that is demanded for more than one purpose so that an increase in demand for one purpose reduces the available supply for the other purpose, typically leading to higher prices, eg milk used in butter and cheese.

28
Q

What is derived demand?

A

When the demand for one good or service comes from the demand for another good or service. The demand for cars stimulates the demand for steel, therefore the demand for steel is derived demand.

29
Q

What is supply?

A

The amount offered for sale at each price level.

30
Q

What is planned supply?

A

The amount producers plan to produce at each given price.

31
Q

What is actually supply?

A

The amount that producers in fact produce. This pay differ from planned supply for a variety of reasons such as breakdowns in production, staff absences, etc.

32
Q

What is market supply?

A

The sum of all individual firms supply curves at each given price.

33
Q

What is extension in supply?

A

When there is an increase in supply because the market price has risen.

34
Q

What is contraction in supply?

A

When the amount offered for sale is reduced because the price level has fallen.

35
Q

What is joint supply?

A

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

36
Q

What is an equilibrium?

A

The price at which demand is equal to supply and there is no tendency for change.

37
Q

What is a disequilibrium?

A

A situation within the market where supply does not equal demand.

38
Q

What is excess supply?

A

When supply at a particular price is greater than demand; this should signal to producers to lower prices.

39
Q

What is a market-clearing price?

A

The price at which all goods that are supplied will be demanded.

40
Q

What is excess demand?

A

When demand is greater than supply at a given price.

41
Q

What is a maximum price?

A

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

42
Q

What is minimum price?

A

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

43
Q

What is price elasticity?

A

The responsiveness of demand to a change in the price level. The formula is percentage change in quantity demanded divided by percentage change in price.

44
Q

What are subsidies?

A

Payments by government to producers to encourage production of a good or services. Often subsidies are found in farming where farmers receive funds from government per tonne. this typically means that prices can be lower than would otherwise be the case.

45
Q

What are incumbents?

A

The existing firms in the industry

46
Q

What are contestable markets?

A

Where there is free entry and free exit of other firms

47
Q

What is competition policy?

A

Methods that the uk government and EU authorities use in order to make markets most efficient

48
Q

What are restrictive trade practises?

A

Methods used by firms to reduce competition in a market

49
Q

What is competition commission?

A

A government organisation responsible for implementing policy in relation to monopolies

50
Q

What is dominant market position?

A

Where a firm, or group of firms working together, have a market share of 42%

51
Q

What is the office of fair trading?

A

A government organisation responsible for implementing aspects did competition policy

52
Q

What is the department of trade and industry?

A

The government department responsible for British industry

53
Q

What is public interest?

A

A term used broadly to cover the public’s right not to be exploited by firms abusing monopoly power

54
Q

What is nationalisation?

A

State control of firms

55
Q

What is privatisation?

A

Sales of government owned assets to the private sector

56
Q

What is deregulation?

A

The process of removing government controls from markets

57
Q

What are restrictive trade practises?

A

Methods used by firms to reduce competition in a market

58
Q

What is a natural monopoly?

A

A firm that can theoretically gain continuous economies o scale and where it is thus uneconomic for more than one firm to supply the market

Economics A2 (2 decks)

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