Micro key terms Flashcards
Define allocativle efficency
Allocative efficiency occurs when resources are distributed to produce the goods and services most desired by society, where P = MC.
define abnormal profits (supernormal profit)
profits over and above normal profits
what is adverse selection
Adverse selection occurs when one party in a transaction has more information than the other, leading to high-risk individuals being more likely to engage in the transaction.
what is absolute poverty
a condition characterized by severe depriivation of basic human needs
what is altruism
concern for welfare of others
what is anchoring
Anchoring is a cognitive bias where people rely too much on the first piece of information (the “anchor”) when making decisions.
what is an artificial barrier
barriers created by firms, such as high levels of advertising and expenditur or preditory pricing
what’s asymetric infomation
when one party posses more information than another relevant to exchange with each other
availability bias
people make judgments about future events based off of past similar events
how to calculate average cost of labour
total wage cost / number of workers employed
how to calculate average fixed cost
AFC = Total Fixed Cost ÷ Output
how to claculate average revenue
total revenue/ output
how to calculate average total cost
ATC= AFC+ AVC
how to calculate average variable cost
AVC= TVC/Q
what’s bounded rationality
Bounded rationality is people making decisions with limited information, time, and cognitive ability,
what’s bounded self control
individuals lack the self control in what they see as their self interests
define cartel
a collusive agreement by firms, usually to fix prices
define choice architecture
a framework which sets out ways which choices can be presented to consumers which can impact decision making
collective bargaining
a process which wage rates and other conditions of work are negotiated and agreed on by a union with an employer
what a constant returns to scale
when all scales of all fop employed increase, output increases at the same rate
what is contractualisation
when services which were publicly owned become privatized
creative destruction
capitalism evolving and renewing itself over time through new technologies and innovations replacing older technology and instruction
dead weight welfare loss
welfare loss when maximum attainable level is not achieved
decreasing return to scale
when scale of all fop employed increase, output increases at a slower weight
derived demand
it is demand that is dependent on the demand for something else
diseconomies of scale
as output increases, long run average cost rises
