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Economics Key Terms > Micro-Economics > Flashcards

Micro-Economics Flashcards

1
Q

Allocative Efficiency

A

When it is not possible to make anyone better off without making someone worse

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2
Q

Composite Demand

A

Where goods/services have more than one use so that an increase in demand for one product leads to a fall in supply of the other (e.g. If there is an increase in demand for cheese, there will be less resources (milk) available for butter)

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3
Q

Complementary products

A

Goods that are consumed together

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4
Q

Cross price elasticity of demand

A

Responsiveness of demand for good X following a change in the price of good Y (make a distinction between substitute products and complementary goods)

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5
Q

Derived Demand

A

Occurs when the demand for a particular product demands on the demand for another product / activity

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6
Q

Division of labour

A

Breaking the production process and assigning workers to particular tasks

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7
Q

Economic Welfare

A

The benefit / satisfaction an individual or society gets from the allocation of resources

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8
Q

Economic Goods

A

Goods that are scarce and therefore have an opportunity cost

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9
Q

Effective Demand

A

Demand supported by the ability to pay for a good or service

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10
Q

Equilibrium

A

The price at which demand is equal to supply

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11
Q

Externalities

A

Producing/consuming a good cause an impact on third parties not directly related

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12
Q

Factor Market

A

The market for the factors of production that make goods and services

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13
Q

Free Goods

A

Goods that have no opportunity cost

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14
Q

Free Market Economy

A

Very limited government involvement in allocation of resources, main role is to ensure that there is fairness in the market

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15
Q

Human Capital

A

The skills, abilities, motivation and knowledge of labour

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16
Q

Incidence of Tax

A

The proportion of tax that is passed onto the consumer

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17
Q

Income elasticity of demand

A

The proportion to which demand changes when there is a change in income

18
Q

Market Demand

A

Total demand in a market for a good, the sum of all individuals’ demand

19
Q

Maximum Price

A

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

20
Q

Minimum Price

A

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

21
Q

Renewable resources

A

Resources that are able to be replenished over time

22
Q

Normal Goods

A

Goods or services that will see an increase in demand when income rises

23
Q

Opportunity cost

A

The next best alternative given up when an economic decision is made

24
Q

Price elasticity

A

The responsiveness of demand to a change in the price level

25
Q

Production Possibility Boundary

A

Indicates the maximum possible output that can be achieved

26
Q

Productive efficiency

A

When a firm operates at minimum average total cost, producing the maximum possible output

27
Q

Inferior Goods

A

Goods or services that will see demand fall when income rises

28
Q

Subsidies

A

Payments by the government to producers to encourage production of a good/service

29
Q

Value Judgements

A

Statements or opinions expressed that are not testable or cannot be verified

30
Q

Normative Judgements

A

Opinions that require value judgements to be made

31
Q

Positive Statements

A

Statements that can be tested against real-world data

32
Q

Contractions in demand

A

Falls in the quantity demanded caused by rises in prices

33
Q

Extensions in demand

A

Increases in demand caused by falls in price

34
Q

Planned Supply

A

The amount producers plan to produce at each given price

35
Q

Actual Supply

A

The amount that producers in fact produce

36
Q

Market Supply

A

Total supply in market, the sum of all individual supplier’s supply

37
Q

Extension in Supply

A

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

38
Q

Contraction in Supply

A

When there is a decrease in supply because price levels have fallen

39
Q

Joint Supply

A

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

40
Q

Market-clearing price

A

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

41
Q

Substitutes

A

Goods that can be used as alternatives to another good

Economics Key Terms (1 decks)

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