micro def(blue)

Question 1

Centrally planned economy

Answer 1

decisions on resource allocation are guided by the state

Question 2

Ceteris paribus

Answer 2

A latin phrase meaning ‘other things being equal’ ; it is used in economics when we focus on changes in one variable while holding other influences constant

Question 3

Competitive demand

Answer 3

Demand for goods that are in competition with each other (these goods are also known as substitute goods)

Question 4

Competetive market

Answer 4

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

Question 5

Complements

Answer 5

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

Question 6

Composite demand

Answer 6

demand for a good that has multiple uses

Question 7

Consumer surplus

Answer 7

The difference between the price consumers are willing and able to pay for a good or service and the price they actually pay for

Question 8

Cross elasticity of demand (XED)

Answer 8

the responsiveness of quantity demanded for one product in relation to a change in the price of another product

Question 9

Demand

Answer 9

the quantity of a product that consumers are willing and able to purchase at various prices over a given time period ( assuming ceteris paribus)

Question 10

Derived demand

Answer 10

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

Question 11

Economic agent

Answer 11

Economic agents are the households, firms and departments of government that make decisions about what and how to produce and consumer in an economy

Question 12

Elasticity

Answer 12

A measure of the sensitivity of one variable to changes in another variable ( or the extent to which buyers and sellers respond to a change in market conditions)

Question 13

Equilibrium

Answer 13

Classical economic equilibrium is a condition where market forces are balanced and demand equals supply

Question 14

Equilibrium price

Answer 14

The price at which demand equals supply ( also referred to as the market clearing price)

Question 15

Firm

Answer 15

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

Question 16

Free market economy

Answer 16

One in which resource allocation is guided by market forces without intervention by the state

Question 17

Income elasticity of demand ( YED)

Answer 17

The responsiveness of quantity demanded to a % change in income

Question 18

Inferior good

Answer 18

Goods for which an increase in income leads to a fall in quantity demanded, goods with a negative income elasticity of demand

Question 19

Invisible hand

Answer 19

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

Question 20

Joint demand

Answer 20

Demand for goods which are independent, such that they are demanded together

Question 21

Join supply

Answer 21

Supply of products that do not compete for firms’ resources

Question 22

Law of demand

Answer 22

A ‘law’ that states that there is an inverse relationship between quantity demanded and the price of a good or service, ceteris paribus

Question 23

Luxury goods

Answer 23

One for which the income elasticity of demand is positive and greater than 1

Question 24

Market

Answer 24

Where buyers and sellers meet for the purpose of trade/ exchange

Question 25

Market economy

Answer 25

An economic system whereby resources are allocated through the free market mechanism

Question 26

Mixed economy

Answer 26

Resources are allocated partly through free market price signals and partly on the basis of direction by government

Question 27

Model

Answer 27

A simplified representation of reality used to provide insight into economic decisions and events

Question 28

Normal good

Answer 28

Goods for which an increase in income leads to an increase in quantity demanded (.. goods with a positive income elasticity of demand)

Question 29

Price

Answer 29

The amount of money that is paid for a given amount of a particular good or service

Question 30

Price elastic

Answer 30

where the percentage change in the quantity demanded responds greater less than proportionally to a % change in price

Question 31

Price inelastic

Answer 31

Where the percentage change in the quantity demanded responds less than proportionally to a % change in price

Question 32

Price elasticity of demand (PED)

Answer 32

The responsiveness of quantity demanded to a % change in the price of the product

Question 33

Price elasticity of supply (PES)

Answer 33

The responsiveness of quantity supplied to a % change in the price of the product

Question 34

Price system

Answer 34

A method of allocating resources by the free movement of prices

Question 35

Producer surplus

Answer 35

The difference between the minimum price that suppliers are willing and able to accept for a product and the price at which they actually sell

Question 36

Resource allocation

Answer 36

The way in which a society’s productive assets are used — their alternative uses

Question 37

Substitutes

Answer 37

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

Question 38

Supply

Answer 38

The quantity of a product that producers are willing and able to provide at various prices over a given time period (assuming ceteris paribus)

Question 39

Supply curve

Answer 39

The relationship between quantity supplied and the price of a product