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a-level economics > Micro > Flashcards

Micro Flashcards

1
Q

Opportunity Cost

A

The value of the next-best alternative forgone.

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2
Q

Production possibility curve

A

A curve showing the maximum combinations of goods and services that can be produced in a set period of time given available resources.

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3
Q

Productive efficiency

A

Attained when a firm operates at minimum average total cost, choosing an appropriate combination of inputs (cost efficiency) and producing the maximum output possible from those inputs (technical efficiency)

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4
Q

Economic growth

A

An expansion in the productive capacity of the economy.

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5
Q

Resource allocation

A

The way in which a society’s productive assets (land, labour, capital, enterprise) are used amongst their alternative uses.

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6
Q

Free market economy

A

Market forces are allowed to guide the allocation of resources within a society.

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7
Q

Capitalism

A

A system of production in which there is private ownership of productive resources, and individuals are free to pursue their objectives with minimal interference from government.

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8
Q

Invisible hand

A

A term used by Adam Smith to describe the way in which resources are allocated in a market economy.

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9
Q

Centrally planned economy

A

Decisions on resource allocation are guided by the state.

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10
Q

Mixed economy

A

Resources are allocated partly through price signals and partly by government.

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11
Q

Total cost

A

The sum of all costs that are incurred in producing a given level of output.

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12
Q

Market

A

A set of arrangements that allows transactions to take place.

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13
Q

Demand

A

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

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14
Q

Derived demand

A

Demand for a factor of production or a good which derives not from the factor or the good itself, but from the goods it produces.

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15
Q

Joint demand

A

Demand for goods which are interdependent, such that they are demanded together.

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16
Q

Composite demand

A

Demand for a good that has multiple uses.

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17
Q

Competitive demand

A

Demand for goods that are in competition with each other.

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18
Q

Law of demand

A

A law that states that there is an inverse relationship between quantity demanded and the price of a good or service.

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19
Q

Demand curve

A

A graph showing how much of a good will be demanded by consumers at any given price.

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20
Q

Normal good

A

One where the quantity demanded increases in response to an increase in consumer incomes.

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21
Q

Inferior good

A

One where the quantity demanded decreases in response to an increase in consumer incomes.

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22
Q

Substitutes

A

Two goods are said to be substitutes if consumers regard them as alternatives, so that demand for one good is likely to rise if the price of the other good rises.

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23
Q

Complements

A

Two goods are said to be complements if people tend to consume them jointly, so that an increase in the price of one good causes the demand for the other good to fall.

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24
Q

Extension

A

A movement along the demand curve to the right.

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25
Q

Contraction

A

A movement along the demand curve to the left.

26
Q

Income effect

A

As a price falls the amount that consumers can buy with their income increases - causing an increase in demand.

27
Q

Substitution effect

A

A fall in the price of a good makes it cheaper compared to other goods - this causes an increase in demand for the cheaper good and a decrease in demand for the more expensive good.

28
Q

Consumer surplus

A

The value that consumers gain from consuming a good or service over and above the price paid.

29
Q

Firm

A

An organisation that brings together factors of production in order to produce output.

30
Q

Competitive market

A

A market in which individual firms cannot influence the price of the good or service they are selling, because of competition from other firms.

31
Q

Competitive supply

A

A situation in which a firm can use its factors of production to produce alternative products.

32
Q

Joint supply

A

Where a firm produces more than one product together.

33
Q

Composite supply

A

Where a product produced by a firm serves more than one market.

34
Q

Supply curve

A

A graph showing the quantity supplied at any given price.

35
Q

Producer surplus

A

The difference between the price received by firms for a good or service and the price at which they would have been prepared to supply that good or service.

36
Q

Marginal cost

A

The cost of producing an additional unit of output.

37
Q

Market equilibrium

A

A situation that occurs in a market when the price is such that the quantity that consumers wish to buy is exactly balanced by the quantity that firms wish to supply.

38
Q

Unemployment

A

When people seeking work at the going wage cannot find a job.

39
Q

Comparative static analysis

A

Examines the effect on equilibrium of a change in the external conditions affecting a market.

40
Q

Elasticity

A

A measure of the sensitivity of one variable to changes in another variable.

41
Q

Price elasticity of demand

A

A measure of the sensitivity of quantity demanded to a change in the price of a good or service.

42
Q

Income elasticity of demand

A

A measure of the sensitivity of quantity demanded to a change in consumer income.

43
Q

Inferior good

A

One where the quantity demanded decreases in response to an increase in consumer incomes.

44
Q

Normal good

A

One where the quantity demanded increases in response to an increase in consumer incomes.

45
Q

Superior good (luxury good)

A

One for which the income elasticity of demand is positive, and greater than 1, such that as income rises, consumers spend proportionally more on the good.

46
Q

Cross elasticity of demand

A

A measure of the sensitivity of quantity demanded to a change in the price of some other good or service.

47
Q

Price elasticity of supply

A

A measure of the sensitivity of quantity supplied of a good or service to a change in the price of that good or service.

48
Q

Allocative efficiency

A

Achieved when consumer satisfaction is maximised.

49
Q

Economic efficiency

A

A situation in which both productive efficiency and allocative efficiency have been reached.

50
Q

Pareto optimum

A

An allocation of resources is said to be a pareto optimum if no reallocation of resources can make an individual better off without making some other individual worse off.

51
Q

Market failure

A

A situation in which the free market mechanism does not lead to an optimal allocation of resources.

52
Q

Private cost

A

A cost incurred by an individual (firm or consumer) as part of its production or other economic activities.

53
Q

External cost

A

A cost that is associated with an individual’s (a firm or household’s) production or other economic activities, which is borne by a third party.

54
Q

Marginal social cost

A

The cost to society of producing an extra unit of a good.

55
Q

Private benefit

A

A benefit gained by an individual (firm or consumer) as part of its consumption.

56
Q

External benefit

A

A benefit gained by an individual’s (a firm or household’s) consumption, which spill over a third party.

57
Q

Marginal social benefit

A

The additional benefit that society gains from consuming an extra unit of a good.

58
Q

Externality

A

A cost or a benefit that is external to a market transaction and is thus not reflected in market prices.

59
Q

Consumption externality

A

An externality that affects the consumption side of a market, which may be either positive or negative.

60
Q

Production externality

A

An externality that affects the production side of a market, which may be positive or negative.

a-level economics (2 decks)

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