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Economics IGCSE > Microeconomics > Flashcards

Microeconomics Flashcards

1
Q

Wants

A

Desires for goods and services

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2
Q

Resources

A

Factors used to produce goods and services

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3
Q

The economic problem

A

Unlimited wants exceeding finite resources

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4
Q

Scarcity

A

A situation

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5
Q

Economic good

A

a product which requires resources to produce it and therefore has an opportunity cost

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6
Q

Free good

A

a product that does not require any resources to make it and so does not have an opportunity cost.

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7
Q

Factors of production

A

the economic resources of land, labour, capital and enterprise

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8
Q

Land

A

gifts of nature available for production

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9
Q

Labour

A

the human effort used in producing goods and services.

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10
Q

Capital/capital goods

A

human-made goods used in production

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11
Q

Consumer goods

A

goods and services purchased by households for their own satisfaction

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12
Q

Enterprise

A

risk-bearing and key decision making in business

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13
Q

Occupationally mobile

A

capable of changing use

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14
Q

Geographically immobile

A

incapable of moving from one location to another location

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15
Q

Mobility of labour

A

the ability of labour to change where it works or in which occupation.

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16
Q

Mobility of capital

A

the ability to change where capital is used or in which occupation

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17
Q

Mobility of enterprise

A

the ability to change where enterprise is used or in which occupation.

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18
Q

Entrepreneur

A

a person who bears the risks and makes the key decisions in a business.

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19
Q

Labour force

A

people in work and those actively seeking work.

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20
Q

Productivity

A

the output per factor of production in an hour

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21
Q

Labour productivity

A

output per worker hour.

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22
Q

Output

A

goods and services produced by the factors of production

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23
Q

Investment

A

spending on capital goods

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24
Q

Gross investment

A

total spending on capital goods

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25
Q

Depreciation (capital consumption)

A

the value of capital goods that have worn out or become obsolete

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26
Q

Net investment

A

gross investment minus depreciation.

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27
Q

Negative net investment

A

a reduction in the number of capital goods caused by some obsolete and worn out capital goods not being replaced.

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28
Q

Opportunity cost

A

the best alternative forgone.

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29
Q

Production possibility curve

A

a curve that shows the maximum output of two types of products and combination of those products that can be produced with existing resources and technology.

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30
Q

Microeconomics

A

the study of the behaviour and decisions of households and firms, and the performance of individual markets

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31
Q

Macroeconomics

A

the study of the whole economy

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32
Q

Market

A

an arrangement which brings buyers into contact with sellers

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33
Q

Economic agents

A

those who undertake economic activities and make economic decisions

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34
Q

Private sector

A

firms owned by shareholders and individuals

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35
Q

Economic System

A

the institutions, organisations and mechanisms that influence economic behaviour and determine how resources are allocated

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36
Q

planned economic system

A

an economic system where the government makes the crucial decisions, land and capital are state-owned and resources are allocated by directives

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37
Q

directives

A

state instructions given to state-owned enterprises

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38
Q

mixed economic system

A

an economy in which both the private and public sectors play an important role

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39
Q

market economic system

A

an economic system where consumers determine what is produced, resources are allocated by the price mechanisms and land and capital are privately owned

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40
Q

price mechanism

A

the way the decisions made by households and firms interact to decide the allocation of resources

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41
Q

capital-intensive

A

the use of a high proportion of capital relative to labour

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42
Q

labour-intensive

A

the use of a high proportion of labour relative to capital

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43
Q

Demand

A

the willingness and ability to buy a product

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44
Q

Supply

A

the willingness and ability to sell a product

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45
Q

Market Equilibrium

A

a situation where demand and supply are equal at the current price

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46
Q

Market Disequilibrium

A

a situation where demand and supply are not equal at the current price

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47
Q

Market Demand

A

total demand for a product

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48
Q

Aggregation

A

the addition of individual components to the arrive at a total amount

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49
Q

Extension in demand

A

a rise in the quantity demanded caused by a fall in the price of the product itself

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50
Q

contraction in demand

A

a fall in the quantity demanded caused by a rise in the price of the product itself

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51
Q

changes in demand

A

shifts in the demand curve

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52
Q

increase in demand

A

a rise in demand at any given price, causing the demand curve to shift to the right

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53
Q

decrease in demand

A

a fall in demand at any given price, causing the demand curve to shift to the left

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54
Q

normal goods

A

a product whose demand increases when income increases and decreases when income falls (good quality products)

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55
Q

inferior goods

A

a product whose demand decreases when income increases and increases when income falls (poor quality products)

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56
Q

substitute

A

a product that can be used in place of another

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57
Q

complement

A

a product that is used together with another product

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58
Q

ageing population

A

an increase in the average age of the population

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59
Q

birth rate

A

the number of live births per thousand of the population in a year

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60
Q

market supply

A

total supply of a product

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61
Q

extension in supply

A

a rise in the quantity supplied caused by a rise in the price of the product itself

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62
Q

contraction in supply

A

a fall in the quantity supplied caused by a fall in the price of the product

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63
Q

change in supply

A

changes in supply conditions causing shifts in the supply curve

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64
Q

increase in supply

A

a rise in supply at any given price, causing the supply curve to shift to the right

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65
Q

decrease in supply

A

a fall in supply at any given price, causing the supply curve to shift to the left

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66
Q

unit cost

A

the average cost of production. It is found by dividing total cost by output

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67
Q

improvements in technology

A

advances in the quality of capital goods and methods of products

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68
Q

direct taxes

A

taxes on the income and wealth of individuals and firms

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69
Q

indirect taxes

A

taxes on goods and services

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70
Q

tax

A

a payment to the government

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71
Q

subsidy

A

a payment by a government to encourage the production or consumption of a product

72
Q

equilibrium price

A

the price where demand and supply are equal

73
Q

excess supply

A

the amount by which supply is greater than demandd

74
Q

disequilibirum

A

a situation where demand and supply are not equal

75
Q

excess demand

A

the amount by which demand is greater than supply

76
Q

price elasticity of demand (PED)

A

a measure of the responsiveness of the quantity demanded to a change in price

77
Q

elastic demand

A

when the quantity demanded changes by a greater percentage than the change in price

78
Q

inelastic demand

A

when the quantity demanded changes by a smaller percentage than the change in price

79
Q

perfectly elastic demand

A

when a change in price causes a complete change in the quantity demanded

80
Q

perfectly inelastic demand

A

when a change in price has no effect on the quantity demanded

81
Q

unit elasticity of demand

A

when a change in price causes an equal change in the quantity demanded, leaving total revenue unchanged

82
Q

price elasticity of supply

A

a measure of the responsiveness of the quantity supplied to a change in price

83
Q

elastic supply

A

when the quantity supplied changes by a greater percentage than the change in price

84
Q

inelastic supply

A

when the quantity supplied changes by a smaller percentage than the change in price

85
Q

perfectly inelastic supply

A

when a change in price has no effect on the quantity supplied

86
Q

perfectly elastic supply

A

when a change in price causes a complete change in quantity supplied

87
Q

unit PES

A

when a change in price causes an equal percentage change in the quantity supplied

88
Q

public sector

A

the part of the economy controlled by the government

89
Q

state-owned enterprises(SOEs)

A

organisations owned by the government which sells products

90
Q

privatisation

A

the sale of public sector assets to the private sector

91
Q

price mechansim

A

the system by which the market forces of demand and supply determine prices

92
Q

market failure

A

market forces resulting in an inefficient allocation of resources

93
Q

free rider

A

someone who consumes a good or service without paying for it

94
Q

allocative efficiency

A

when resources are allocated to produce the right products in the right quantities

95
Q

productively efficient

A

when products are produced at the lowest possible cost and making full use of resources

96
Q

dynamic efficiency

A

efficiency occurring over time as a result of investment and innovation

97
Q

third parties

A

those not directly involved in producing or consuming a product

98
Q

social benefits

A

the total benefits to a society of an economic activity

99
Q

social costs

A

the total costs to a society of an economic activity

100
Q

private benefits

A

benefits received by those directly consuming or producing a product

101
Q

private costs

A

costs borne by those directly consuming or producing a product

102
Q

external costs

A

costs imposed on those who are not involved in the consumption and production activities of others directly

103
Q

external benefits

A

benefits enjoyed by those who are not involved in the consumption and production activities of others directly

104
Q

socially optimum output

A

the level of output where social cost equals social benefit and society’s welfare is maximised

105
Q

merit goods

A

products which the government considers consumers do not fully appreciate how beneficial they are and so which will be under-consumed if left to market forces. Such goods generate positive externalities

106
Q

demerit goods

A

products which the government considers consumers do not fully appreciate how harmful they are and so which will be over-consumed if left to market forces. Such goods generate negative externalities.

107
Q

public good

A

a product which is non-rival and non-excludable and hence needs to be financed by taxation

108
Q

private good

A

a product which is both rival and excludable

109
Q

monopoly

A

a single seller

110
Q

price fixing

A

when two or more firms agree to sell a product at the same price

111
Q

mixed economic system

A

an economy in which both the private and public sectors play an important role

112
Q

rationing

A

a limit on the amount that can be consumed

113
Q

lottery

A

the drawing of tickets to decide who will get the products

114
Q

nationalisation

A

moving the ownership and control of an industry from the private sector to the government

115
Q

public corporation

A

a business organisation owned by the government which is designed to act in the public interest

116
Q

multinational companies

A

companies which produce in more than one country

117
Q

money

A

an item which is generally acceptable as a means of payment

118
Q

commercial banks

A

banks which aim to make a profit by providing a range of banking services to households and firms

119
Q

liquidity

A

being able to turn an asset into cash quickly without a loss

120
Q

central bank

A

a government-owned bank which provides banking services to the government and commercial banks and operates monetary policy

121
Q

mortgage

A

a loan help to buy a house

122
Q

disposable income

A

income after income tax has been deducted and state benefits received

123
Q

consumption

A

expenditure by households on consumer goods and income

124
Q

rate of interest

A

charge for borrowing money and a payment for lending money

125
Q

Earnings

A

the total pay received by a worker

126
Q

Wage rate

A

a payment which employer contracts to pay a worker. It is the basic wage a worker receives per unit of time or unit of output.

127
Q

National minimum wage (NMW)

A

a minimum rate of wage for an hour’s work, fixed by the government for the whole economy

128
Q

Wage differential

A

the difference in wages

129
Q

Primary sector

A

covers agriculture, fishing, forestry, mining and other industries which extract natural resources.

130
Q

Secondary sector

A

covers manufacturing and construction industries

131
Q

Tertiary sector

A

covers industries which provide services

132
Q

Elasticity of demand for labour

A

a measure of the responsiveness of demand for labour to a change in the wage rate

133
Q

Elasticity of supply of labour

A

a measure of the responsiveness of the supply of labour to a change in the wage rate

134
Q

Division of labour

A

workers specialising in particular tasks

135
Q

Trade union

A

an association which represents the interests of a group of workers

136
Q

Collective bargaining

A

representatives of workers negotiating with employers’ association

137
Q

Real income

A

income adjusted for inflation

138
Q

Industrial action

A

when workers disrupt production to put pressure on employers to agree to their demands

139
Q

Strike

A

a group of workers stopping work to put pressure on an employer to agree to their demands

140
Q

Industry

A

a group of firms producing the same product

141
Q

The quaternary sector

A

covers service industries that are knowledge based

142
Q

Internal growth

A

an increase in the size of a firm resulting from it enlarging existing plants or opening new ones

143
Q

External growth

A

an increase in the size of a firm resulting from it merging or taking over another firm

144
Q

Horizontal merger

A

the merger of firms producing the same product and at the same stage of production

145
Q

Vertical merger

A

the merger of one firm with another firm that either provides an outlet for its products or supplies it with raw materials, components or the products it sells

146
Q

Conglomerate merger

A

a merger between firms producing different products

147
Q

Rationalisation

A

eliminating unnecessary equipment and plant to make a firm more efficient

148
Q

Vertical merger backwards

A

a merger with a firm at an earlier stage of the supply chain

149
Q

Vertical merger forwards

A

a merger with a firm at a later stage of the supply chain

150
Q

Internal economies of scale

A

lower long run average costs resulting from a firm growing in size

151
Q

External economies of scale

A

lower long run average costs resulting from an industry growing in size

152
Q

Internal diseconomies of scale

A

higher long run average costs arising from a firm growing too large

153
Q

External diseconomies of scale

A

higher long run average costs arising from an industry growing too large

154
Q

Corporation tax

A

a tax on profits of a company

155
Q

Total cost

A

the total amount that has to be spent on the factors of production used to produce a product

156
Q

Average total cost

A

total cost divided by output

157
Q

Fixed costs

A

costs which do not change with output in the short run

158
Q

Average fixed cost

A

total fixed cost divided by output

159
Q

Variable cost

A

costs that change with output

160
Q

Average variable cost

A

total variable cost divided by output

161
Q

Long run

A

the time period when all factors of production can be changed and all costs are variable

162
Q

Price

A

the amount of money that has to be given to obtain a product

163
Q

Total revenue

A

the total amount of money received from selling a product

164
Q

Average revenue

A

the total revenue divided by the quantity sold

165
Q

Profit satisficing

A

sacrificing some profit to achieve other goals

166
Q

Profit maximisation

A

making as much profit as possible

167
Q

Market structure

A

the conditions which exist in a market including the number of firms

168
Q

Competitive market

A

a market with a number of firms that compete with each other

169
Q

Normal profit

A

the minimum level of profit required to keep a firm in the industry in the long run

170
Q

Supernormal profit

A

profit above that needed to keep a firm in the market in the long run

171
Q

Monopoly

A

a market with a single supplier

172
Q

Barrier to entry

A

anything that makes it difficult for a firm to start producing the product

173
Q

Barrier to exit

A

anything that makes it difficult for a firm to stop making the product

174
Q

Scale of production

A

the size of production units and the methods of production used.

175
Q

Sunk costs

A

cost that cannot be recovered if the firm leaves the industry

Economics IGCSE (3 decks)

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