microeconomics Flashcards
what is meant by land?
natural resources eg. sand, rock and wood, that are used in production
what is meant by capital?
man made goods that aid production eg machines and computers
what is labour?
all human mental and physical effort that goes into production
what is meant by enterprise?
skills needed to organise resources into some form of production
what is scarcity
a situation that arises from the fact that people have unlimited wants by resources to meet wants are limited
what is opportunity cost?
cost of giving up the best alternative when a choice is made
how is a ppf shown to be efficient
all points on the boundary are productively efficient because they show a combination of goods and services that best match tastes and preferences
what is productive efficient
occurs when it is impossible to produce more of one good without producing less of another
what is allocative efficiency
`occurs when available resources are used to produce a combination of goods and services that best match peoples tastes and preferences
what is the advantages of division of labour?
enables workers to gain skills in a narrow range of tasks
enables workers to be more productive
most cost effective - cuts training costs
worth while buying capital goods
what are the disadvantages of division of labour
no sense of ownership
stops people learning new skills
if one person doesnt turn it it can delay production
boredom
what is demand
quantity of goods thar consumers are able and willing to purchase for various prices over a period of time
what causes movement along the demand curve
the only thing that causes movement along the demand curve is a change in price called change in quantity demanded
what are the conditions of demand
change in disposable income
change in taste and preferences
price and availability of other products
change in population size
what is consumer surplus and what will change consumer surplus
the difference between what buyers are willing to pay and what they actually pay
a decrease in price would increase consumer surplus
what is the law of supply
as price rises producers increase supply
what is the law of demand
as price rises there will be a contraction of demand
what causes supply curves to shift
changes in cost of production
change in production technology
change in price of substitutes
government taxes
what is producer surplus
difference between price producers are willing and able to supply a product for and the price they actually get
what causes a change in equilibrium price?
change in supply
change in demand
change in both
what are complements
goods which are demanded together
an rise in quantity demanded for one will lead to an increase in demand for another
what are substitues
goods which can replace eachother
rise in the price of one will lead to an increase demand for the other
what is derived demand
goods that are demanded because they are needed for production of other goods
what is composite demand
when a good is demanded for two or more distint uses
increase
what is joint supply
when one good is supplied for two different purposes
what is price elasticity of demand
measures responsiveness of quantity demanded following a change in price
when is demand price elastic
when the value of PED is greater than one
what is PED inelastic
when value of PED is less than 1
what are normal goods
goods you buy more of when income increases. it has a positive value of YED (income elasticity of demand)
what are inferior goods
goods people buy less of when income increases. negative income elasticity of demand
What is cross elasticity of demand
measures demand for one good in response to the price of another
what value of XED do compliments have?
negative XED
what value of XED do substitutes have?
positive XED
