Micro Flashcards
An indirect tax based on a percentage of the sales price of a good or service
Ad valorem tax
When the value that consumers place on a good or service equals the cost of the resources used up in production
Allocative efficiency
Factors making it expensive for new firms to enter a market
Barriers to entry
Branch of economics that studies the impact of psychological and social factors on economic decision making
Behavioural economics
An illegal market in which the market price is higher than a legally imposed price ceiling
Black market
Any factor that causes production to be delayed or stopped
Bottlenecks
They are schemes that seek to stabilise the market price of agricultural products by buying up supplies of the product when harvests are plentiful and selling stocks of the product onto the market when supplies are low
Buffer stock
The purchase by one organisation of large quantities of a product or raw material
Bulk-buying
A market that favours buyers because supply is plentiful relative to demand and therefore prices are relatively low
Buyer’s market
Something produced as a consequence of producing another good or service
By-product
The extent to which a business is making full use of existing factor resources
Capacity utilisation
Producer or capital goods are useful not in themselves but for the goods and services they can help produce in the future
Capital goods
Refers to the tools and technologies that are used to produce the goods and services we demand
Capital resources
A production technique which uses a high proportion of capital to labour
Capital-intensive
Economic system organised along capitalist lines uses market prices to guide our choices about the production and distribution of goods
Capitalist economy
The process of trapping and storing carbon dioxide produced by burning fossil fuels
Carbon capture and storage
An allowance to a business to generate a specific level of emissions
Carbon credits
A formal agreement among firms
Cartel
To simplify analysis, economists isolate the relationship between two variables by assuming ceteris paribus
Ceteris paribus
UK taxes on cigarettes
Cigarette duties
Any agreement between suppliers in a market to avoid competition
Collusion
Laws and regulation backed up by inspection and penalties for non-compliance
Command and control
Economic system where resources are allocated by the government
Command economy
Goods or services that have characteristics of rivalry in consumption and nonexcludability
Common resources
Government policy directed at encouraging competition in the private sector
Competition policy
A market where no single firm has a dominant position and where the consumer has plenty of choice
Competitive market
Alternative products a firm could make with its resources
Competitive supply
Two complements are said to be in joint demand
Complements
Where goods or services have more than one use so that an increase in the demand for one product leads to a fall in supply of the other
Composite demand
A direct charge for use of roads in a defined zone
Congestion charging
Consumption designed to impress others rather than something that is wanted for its own sake
Conspicuous consumption
Limits to what we can afford to consume
Constraints
A good such as a washing machine or a digital camera that lasts a period of time, during which the consumer can continue getting utility from it
Consumer durable
When the economic system allows scarce resources to be
allocated to producing goods and services that reflect the wishes of consumers
Consumer sovereignty
The difference between the total amount that consumers are
willing and able to pay for a good or service and the total amount that they actually pay
Consumer surplus
The act of buying and using goods and services to satisfy wants
Consumption
Market with no entry barriers - firms can enter or leave without significant cost
Contestable market
A decision making tool which compares the social costs and social benefits of a project, over time, to establish a net present value
Cost-benefit analysis
Costs faced by a business when producing a good or service for a market
Costs
Responsiveness of demand for good X following a change in the price of good Y
Cross-price elasticity of demand
Demand that changes in a regular way over time depending on the part of the business cycle that an economy is in
Cyclical demand
The consumption of de-merit goods can lead to negative externalities which causes a fall in social welfare
De-merit goods
The loss in producer and consumer surplus due to an inefficient level of production perhaps resulting from market failure or government failure
Deadweight loss
Quantity of a good or service that consumers are willing and able to buy at a given price in a given time period
Demand
A demand curve shows the relationship between the price of an item and the quantity demanded over a period of time
Demand curve
The removal of legally enforced rules that restrict or ban specified activities
Deregulation
When the demand for a particular product depends on the
demand for another product or activity
Derived demand
As more of a variable factor is added to a fixed factor a firm
will reach a point where it has a disproportionate quantity of labour to capital and so the marginal product of labour will fall, thus raising marginal costs
Diminishing returns
Disadvantages to the firm, in the form of higher long-run unit costs, from increasing their size of operation
Diseconomies of scale
A situation where there is a state of imbalance and so a tendency for change
Disequilibrium
The reduction of risk achieved by replacing a single risk with a larger number of smaller unrelated risks
Diversification
The specialisation of labour in specific tasks, intended to increase productivity
Division of labour
A firm with 40% or higher market share
Dominant monopoly
Decision makers
Economic agents
Making the best or optimum use of scarce resources among competing ends so that economic and social welfare is maximised over time
Economic efficiency
An increase in the productive potential of the country
Economy growth
Benefits, in the form of lower unit costs, from increasing the size of operation
Economy of scale
Economies of scope occur where it is cheaper to produce a range of products
Economy of scope
When a consumers’ desire to buy a product is backed up by an ability to pay for it do we speak of demand
Effective demand
Demand for which price elasticity is greater than 1
Elastic demand
Where the price elasticity of supply is greater than +1
Elastic supply
A measure of the sensitivity of one variable to changes in another variable
Elasticity
Price elasticity of supply measures the relationship between change in quantity supplied and a change in price
Elasticity of supply
A charge made to firms that pollute the environment based on the quantity of pollution they emit
Emission tax
An individual who seeks to supply products to a market for a rate of return
Entrepreneur
Refers to the innovation and creativity applied in the production of goods and services
Entrepreneurship resources
A situation where there is no tendency for change
Equilibrium
A view on the ‘rightness’ of an issue based on opinion rather than fact
Equity
The difference between the quantity supplied and the higher quantity demanded when price is set below the equilibrium price
Excess demand
When supply is greater than demand and there are unsold goods in the market
Excess supply
Indirect taxes levied on our spending on goods and services such as cigarettes, fuel and alcohol
Excise duties
The property of a good whereby a person can be prevented from using it
Excludability
Those costs faced by a third party for which no appropriate
compensation is forthcoming
External cost
Third party effects arising from production and consumption of goods and services for which no appropriate compensation is paid
Externalities
A severe and persistent deprivation of basic human needs
Extreme poverty
The rewards to factors of production
Factor incomes
Resources used in the production process; inputs into production (labour, capital, land and entrepreneurship)
Factors of production
There are only a finite number of workers, machines, acres of land and reserves of oil and other natural resources
Finite resources
An organisation that hires and organises resources to make products
Firm
The first company to introduce a new product to market, has the opportunity to extract the greatest long term benefit from the product introduction
First mover advantage
Costs that do not vary directly with the level of output
Fixed costs
A firm varies price by customer to maximise revenue
Flexible pricing
A workforce that is multi-skilled and able to work variable hours in response to changing demand
Flexible working
The forces of supply and demand alone determine price and output without any government intervention
Free market
A business model, especially on the Internet, whereby basic services are provided free of charge while more advanced features must be paid for
Freemium
There are barriers to them moving from one area to another to find work
Geographical immobility
measures the extent to which the distribution of income among individuals or households within an economy deviates from a perfectly equal distribution
Gini coefficient
A process by which economies and cultures have been drawn together through a global network of trade, investment, capital flows, and rapid spread of technology
Globalisation
Tangible, physical products
Goods
Policies that cause a deeper market failure
Government failure
Central and local government spending on goods and services
Government spending
A measure of economic activity carried out in an economy over a period of time
Gross domestic product (GDP)
When the demand for health care services outstrips the available resources leading to waiting lists and delays for health treatment
Health rationing
