micro (T1-T3) keywords Flashcards
allocative efficiency
when econ resources = used to produce g+s that maximise econ welfare
allocative price function
prices allocated away from markets w excess supply to markets w excess demand
capital / producer goods
goods used in the production of other goods
consumer good
goods consumed by households to satisfy needs + wants
factors of production
inputs of the production process –> land + labour + capital + enterprise
finite resources
non-renewable resources that are becoming scarce
fundamental economic prob
deciding how to allocate limited amount of resources w infinite wants
normative statements
have value judgements + opinions that can’t be proved / tested
positive statements
statements w facts that can easily be proved / tested
opportunity cost
the next best alternative forgone when making a choice
production possibility frontier
curve that shows possible combinations of 2 products that can be produced w finite resources
competing supply
resources = used to produce 1 good or another (not both)
competitive market
many buyers + sellers & low barriers to enter + exit
complementary goods
- in joint demand
- often bought together
- like airpods + iphones
incentive price function
price creates incentives for people to adjust their economic transactions
customer sovereignty
consumers = govern production in markets via exercising spending power
demand
consumer = willing + able to buy @ a given price + time
effective demand
‘demand’ that’s backed by the ability to pay for the g/s
disequilibrium
excess demand // supply
joint supply
change in supply of 1 good impacts the supply of another
when 1 good = produced, another is as well from the same raw materials
joint demand
D for 1 product = directly related to market for a related g/s
composite demand
good used to make more than 1 type of product
derived demand
demand for good that’s the input for another good
elasticity
the proportionate responsiveness of a 2nd variable to a change in the 1st variable
excess demand
consumers want more than producers are willing to sell (bottom bit on graph)
excess supply
producers want to sell more than what consumers are willing to buy (top bit of graph)
PED
measured the responsiveness of demand after a change in price
YED
measures the responsiveness of a good’s demand to a change in consumers’ income
XED
measures the responsiveness of 1 good’s demand to a change in the price of another good
price elasticity of supply
measures the responsiveness of a good’s supply to a change in price
substitute goods
- in competing demand –> good that can be used in place of another similar good
- has a +XED (competing demand)
supply
the quantity of a g/s that a producer = willing + able to sell @ a given price + time
average costs
‘total production costs’ / ‘total output’
profit
‘total revenue’ - ‘total costs’
avg revenue
‘total revenue’ / ‘total output’
total cost
‘total fixed costs’ + ‘total variable costs’
total revenue
‘price of each good’ x quantity sold
↳ the total amount of income from the sales of goods / services that are related to the company’s primary operations
diseconomies of scale
when long-run avg costs increase as output rise
economy of scale
when long-run avg costs decrease as output rises
external economy of scale
firms saving due to growth of the industry the firm is a part of
internal economy of scale
firms saving due to the actual firm’s growth
↳ a fall in average costs & a rise in input due to the growth of the firm
division of labour
diff workers performing diff tasks in a good’s / service’s production - limited specialisation
fixed costs
costs of production that don’t vary w output
variable costs
costs from paying variable factors (amount of raw materials needed –> not constant)
specialisation
worker only performing a specific task // small range of tasks –> efficient
short run
time where at least 1 of the FOP = fixed and cannot be varied
long run
time where non of the FOP are fixed and can be varied
long run avg costs
long run cost per unit of output
long run production
production
set of processes that converts inputs into outputs
productive efficiency
minimised avg total costs
productivity
output per unit of input
