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econ > micro definitions > Flashcards

micro definitions Flashcards

1
Q

market

A

where buyer sand sellers of goods or services are linked together to carry out an exchange

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2
Q

demand

A

quantity of goods/ services consumer is willing and able to buy at a different price points

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3
Q

law of demand

A

negative relationship between the price of a good and its quantity demanded over a time period, ceteris paribus

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4
Q

market demand

A

sum of all individual demands for a good

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5
Q

normal good

A

demand for good varies directly with income

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6
Q

inferior good

A

demand for good varies inversely with income

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7
Q

substitute goods

A

goods that can satisfy a similar need

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8
Q

complementary goods

A

the goods tend to be used together
eg. remote and batteries

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9
Q

supply

A

quantity of goods/ services a firm is willing and able to produce and supply to the market for sale at a different price points

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10
Q

law of supply

A

positive relationship between the quantity of supplied and its price over a particular time period, ceteris paribus

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11
Q

competitive supply

A

when goods are alternative products a firm can produce with limited resources

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12
Q

joint supply

A

goods produced together from the same origin
eg. leather and milk

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13
Q

market supply

A

sum of all individual firms’ supplies for a good

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14
Q

total cost

A

all cost of production incurred by a firm

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15
Q

subsidy

A

financial support to producers that reduces costs of production

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16
Q

surplus

A

quantity supply exceeds the quantity demanded

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17
Q

shortage

A

quantity demanded exceeds the quantity supplied

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18
Q

market equilibrium

A

quantity demanded is equal to quantity supplied with no tendency to change

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19
Q

price mechanism

A

rationing method that uses price to control the demand and supply of a good/service in order to reallocate resources

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20
Q

signals

A

prices communicate information to decision makers

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21
Q

incentives

A

prices motivates decision makers to respond to the information

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22
Q

allocative efficiency

A

producing the combination of goods mostly wanted by the society in a free market
answers: what to produce

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23
Q

marginal benefit

A

extra benefit you get from each additional unit of something

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24
Q

consumer surplus

A

highest price consumers are willing to pay for a good - price actually paid

25
Q

producer surplus

A

price received by firms for selling their good - lowest price they are willing to accept to produce the good

26
Q

social surplus

A

sum of consumer and producer surplus

27
Q

social welfare

A

amount of consumer and producer surplus
- when social surplus is maximum, social welfare is maximum

28
Q

welfare loss (deadweight loss)

A

social surplus that are lost to society because resources are not allocated efficiently

29
Q

ped

A

measure of the responsiveness of the quantity of a good demanded to changes in its price

30
Q

necessities

A

goods/services considered to be essential

31
Q

luxuries

A

not necessary/essential

32
Q

total revenue

A

amount of money received by firms with they sell a good

33
Q

yed

A

responsiveness of demand to changes in income

34
Q

pes

A

measure of the responsiveness of the quantity supplied to changes in its price of a good

35
Q

command and control

A

government laws and regulations that must be followed

36
Q

price controls

A

setting of minimum or maximum prices by the government so that prices are unable to adjust to their equilibrium level determined by demand and supply

37
Q

price ceiling

A

maximum price set below the equilibrium by the government

38
Q

price floor

A

minimum price set above the equilibrium

39
Q

indirect taxes

A

a regressive tax imposed on spending to buy goods and services so the tax burden can be shifted to the consumers

40
Q

income

A

sum of money that a business or individual receives in exchange of sale of goods or services, or capital investment

41
Q

individual demand

A

demand schedule for any individuals

42
Q

income effect

A

when price declines, amount of the product which can be purchased using the same money rises

43
Q

nominal income

A

face value of income

44
Q

substitution effect

A

the decrease in demand for a product that can be attributed to consumers switching to cheaper alternatives when its price rises

45
Q

market disequilibrium

A

at any other price other than the equilibrium price

46
Q

price mechanism + invisible hand

A

guided by self interest

47
Q

rationing

A

controlled distribution of resources

48
Q

marginal benefit

A

consumers buy goods/services because it provides them with extra satisfaction

49
Q

productive efficiency

A

involving production with the fewest possible resources
answers: how to produce

50
Q

direct tax

A

tax imposed on income, profits and wealth

51
Q

excise tax

A

indirect tax on a specific good or service

52
Q

specific tax

A

fixed amount of tax imposed on good/service sold per unit

53
Q

ad valorem tax

A

tax calculated as fixed percentage of the price of the good/service

54
Q

goods and services tax + value added tax

A

imposed on all goods and services

55
Q

tradable permits

A

permits that the government gives firms to allow them to produce up to a set amount of carbon each year

56
Q

natural monopoly

A
  • a single firm can produce at a lower average costs than 2 or more firms because of large economies of scale
  • normally firms with huge fixed costs
57
Q

economies of scale

A

decreases in the average cost of production over the long run as a firm increases all its inputs

58
Q

diseconomies of scale

A

increases in the average cost of production over the long run as a firm increases all its inputs

econ (7 decks)

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