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Economics > Microeconomics definitions > Flashcards

Microeconomics definitions Flashcards

1
Q

Economics

A

the study of how society organises scarce productive resources in order to satisfy people’s unlimited wants.

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2
Q

Economic agents

A

any person/group of people who has an influence on the economy by producing, buying, or selling

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3
Q

Ceteris paribus

A

an assumption made in economics that all other things remain equal when analysing the relationship between two variables

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4
Q

Positive economic statements

A

objective statements that can be proved or disproved= what was or will be and these statements can be verified as being true or false by reference to the data or scientific approach=value-free statements.

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5
Q

Normative economic statements

A

Value judgements are subjective. They relate to what should or ought to

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6
Q

Economic problem

A

all economies face the problem of scarce resources and infinite wants.

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7
Q

Scarcity

A

gap or limitation between the resources available and the human wants or needs for them

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8
Q

Needs

A

goods that are necessary for survival, such as water, food, clothing, shelter. Needs are limited.

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9
Q

Wants

A

goods that are not essential for survival but make our lives more comfortable, such as larger car, new TV. Wants are infinite.

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10
Q

Factors of production

A

resources that are used to make goods and services. They include land, labour, capital and enterprise

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11
Q

Land

A

all natural resources including non-renewables such as oil and copper and renewable resources such as water and forests

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12
Q

Labour

A

people within working age within an economy, however not all will be economically active e.g. the early retired. The productivity, i.e. the efficiency, of labour is heavily influenced by education and training

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13
Q

Capital

A

all man-made goods used repeatedly to produce consumer goods e.g. machinery, tools and equipment.

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14
Q

Entrepreneur

A

the person who manages all the other factors of production and often risk their own money to set up a new venture.

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15
Q

Renewable resources

A

those that can be replenished, so the stock level of the resources can be maintained over a period of time

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16
Q

Non-renewable resources

A

those that cannot be renewed. For example, things produced from fossil fuels such as coal, oil and natural gas

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17
Q

Opportunity cost

A

the next best alternative foregone for the option that is chosen.

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18
Q

Economic goods

A

goods which are scarce are known as economic goods e.g. oil, gold. All such goods carry a price that reflects their scarcity.

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19
Q

Free goods

A

have a zero price, examples include air and rain water, consuming these goods involves no opportunity cost

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20
Q

Production possibility frontier

A

represent the maximum output of any combination of two types of products that an economy can produce with its current resources and technology.

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21
Q

Trade-off

A

sacrifice of the production of one good when making a decision to make more of another good.

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22
Q

Capital goods

A

used to produce other goods or services e.g. factory, machinery, robotics and tools. It is wanted not for its own sake but for the consumer goods and services it can provide

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23
Q

Consumer good

A

directly provide utility to consumers. E.g. smartphones, clothes, fast food and cars. A consumer good is wanted for the satisfaction it gives.

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24
Q

Specialisation

A

where an individual, firm, region or country concentrates on the production of a limited range of goods and services.

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25
Q

Division of labour

A

dividing the production process into a number of tasks and assigning each worker a specific task

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26
Q

Bartering

A

system of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money

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27
Q

Double coincidence of wants

A

in order to make an exchange in a barter system a consumer would have to find someone who wants what they have and someone who has what they want.

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28
Q

Medium of exchange

A

one of the functions of money that fulfils the role of being acceptable to both buyers and sellers, removing the need for bartering and allowing people to specialise.

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29
Q

Store of value

A

money can be saved as wealth so it can spent later.

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30
Q

Measure of value

A

money provides a unit of account by pricing of goods/services e.g. in £s. This allows comparison between the relative value of products.

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31
Q

Means of deferred payment

A

enables borrowing and lending. Someone can borrow money in order to buy a product now and pay for it later.

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32
Q

Free market economy

A

an economy where all resources are privately owned and allocated via the price mechanism. There is minimal government intervention.

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33
Q

Mixed economy

A

economy where some resources are owned and allocated by the private sector and some by the public sector.

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34
Q

Command economy

A

economy where there is public ownership of resources and these are allocated by the government.

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35
Q

Market

A

where consumers and producers come into contact with one another to exchange goods and services.

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36
Q

Rational decision making

A

consumers allocate their income to maximise their utility from the goods and services they purchase. Firms use their resources to maximise profits from the goods and services they produce.

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37
Q

Utility

A

the amount of satisfaction obtained from consuming a good or service.

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38
Q

Demand

A

the amount of a good or service demanded at each price over a given period of time.

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39
Q

Total utility

A

the amount of satisfaction a person derives from the total amount of a product consumed.

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40
Q

Marginal utility

A

the satisfaction obtained from consuming one extra unit of a good or service.

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41
Q

Diminishing marginal utility

A

as successive units of a good or service are consumed, the utility gained from each extra unit will fall.

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42
Q

Price elasticity of demand

A

measures the responsiveness of quantity demanded to a change in price.

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43
Q

Income elasticity of demand

A

measures the responsiveness of quantity demanded to a change in income

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44
Q

Perfectly inelastic demand

A

demand remains unchanged in response to the other variable (e.g. price change).

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45
Q

Inelastic demand

A

demand changes by a smaller percentage than the change in the other variable.

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46
Q

Unitary elasticity

A

demand changes by the same percentage as the change in the other variable.

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47
Q

Elastic demand

A

demand changes by a greater percentage than the change in the other variable.

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48
Q

Normal good

A

where demand increases as income increases e.g. books. Luxury goods are normal goods but demand increases by a greater percentage as income rises e.g. designer bags.

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49
Q

Substitute goods

A

good that is in competition with another good and may see demand increase if the price of a rival good increases. XED is positive for substitute goods. E.g. Sky and Virgin Media

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50
Q

Complementary goods

A

good that is bought alongside another good and may see demand increase if the price of the complementary good decreases. XED is negative for complementary goods. E.g. consoles and computer games.

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51
Q

Indirect taxation

A

tax imposed on expenditure that increases businesses costs and reduces supply (supply shifts left).

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52
Q

Subsidies

A

payment from the government to a producer, often given per unit produced. This reduces businesses costs and increases supply (supply shifts right).

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53
Q

Total revenue

A

the total amount of money a firm gains through sale of their goods. TR = Price x Quantity.

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54
Q

Supply

A

the amount of a good or service supplied at each price over a certain period of time.

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55
Q

Elasticity of supply

A

measures the responsiveness of quantity supplied to a change in price.

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56
Q

Short run

A

period of time when at least one factor of production is fixed, therefore supply is likely to be inelastic.

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57
Q

Long run

A

period of time when all factors of production are variable, therefore supply is likely to be more elastic.

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58
Q

Equilibrium

A

determined by the interaction of the supply and demand curves. The equilibrium price and quantity will not change unless there is a change in the conditions of demand/and or supply

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59
Q

Excess supply

A

quantity supplied is greater than quantity demanded at the existing price.

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60
Q

Excess demand

A

quantity demanded is greater than quantity supplied at the existing price.

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61
Q

Rationing

A

market forces of demand and supply ensure that the amount demanded is exactly the same as the amount supplied

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62
Q

Incentive

A

higher price motivates firms to supply more of a good to gain more profit

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63
Q

Signalling

A

change in price provides a message to consumers and producers to change their behaviour

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64
Q

Consumer surplus

A

the difference between how much consumers are willing to pay and what they actually pay for a product.

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65
Q

Producer surplus

A

the difference between the cost of supply and the price received by the producer for the product.

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66
Q

Indirect taxes

A

taxes imposed on expenditure which has the effect of increasing costs and shifting supply left.

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67
Q

Ad valorem taxation

A

taxes imposed as a percentage of the price of the product or service.

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68
Q

Specific taxes

A

taxes imposed as a set amount per unit of the product/service.

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69
Q

Incidence of tax

A

relates to how the burden of a tax is distributed between different groups i.e. producers and consumers.

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70
Q

Subsidy

A

grant from the government which has the effect of reducing costs of production and shifting supply right.

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71
Q

Behavioural economics

A

method of economic analysis that applies psychological insights into human behaviour to explain economic decision-making.

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72
Q

Habitual behaviour

A

frequency of past behaviour influences consumers’ current behaviour.

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73
Q

Inertia

A

consumers may not make an active effort to change their behaviour for many reasons e.g. too much choice/complex information.

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74
Q

Weakness at computation

A

consumers, when thinking about a decision, show weakness as they may be more influenced by recent events, unable to calculate probability and may be influenced when buying (e.g. by marketing of firms)

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75
Q

Market failure

A

occurs when the market forces of supply and demand don’t result in an efficient allocation of resources. The price mechanism doesn’t consider all the costs/ benefits in the production & consumption of the product or service.

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76
Q

Externalities

A

costs or benefits to third parties who are not directly part of a transaction between producers & consumers

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77
Q

Positive externality

A

occurs when the consumption or production of a good causes a benefit to a third party. (Social benefits > private benefit)

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78
Q

Negative externality

A

occurs when the consumption or production of a good causes a harmful effect to a third party. (Social cost > private cost)

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79
Q

Merit goods

A

goods and services that the government feels that people will under-consume- ought to be subsidised or provided free at the point of use so that consumption does not depend primarily on the ability to pay for the good or service

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80
Q

De-merit goods

A

good which can have a negative impact on the consumer – but these damaging effects may be unknown or ignored by the consumer. Demerit goods also usually have negative externalities – where consumption causes a harmful effect on a third party.

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81
Q

Private costs

A

the costs to the first party who’s either the producer or consumer of the good or service

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82
Q

External costs

A

the costs to the third party who is neither the producer nor seller. It is the cost in excess private costs. They are negative spillover effects from the production or consumption which the market fails to consider.

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83
Q

Social costs

A

the sum of private costs and external costs: social costs= private costs +external costs

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84
Q

Private benefits

A

the benefits to the first party who is either the producer or consumer of the good or service

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85
Q

External benefits

A

the benefits to the third party. It is the benefit in excess of private costs. They are positive spillover effects from the production or consumption which the market fails to consider

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86
Q

Social benefits

A

social benefits are simply the sum of private benefits and external benefits

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87
Q

Information gaps

A

where consumers, producers or the government have insufficient knowledge to make rational economic decisions

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88
Q

Symmetric information

A

where both parties in a transaction (consumer and producer) have the same information

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89
Q

Asymmetric information

A

where one party in a transaction has more or superior information compared to another

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90
Q

Private goods

A

goods that have rivalry and excludability in their consumption

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91
Q

Private goods

A

goods that have rivalry and excludability in their consumption

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92
Q

Public goods

A

goods that have non- rivalry and non- excludability in their consumption- not easy to identify who’s benefitting from the good and so who should pay for it and how much they should pay

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93
Q

Quasi-public goods

A

Non rivalry- one person’s

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94
Q

Non- excludability

A

once the good is provided for one person its available to everyone as it is impossible to exclude anyone from using it

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95
Q

Free rider problem

A

once a product is provided it is impossible to prevent people from using it and therefore impossible to charge for it

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96
Q

Government intervention

A

any action carried out by the Government that affects the market with the objective of changing the free market equilibrium / outcome i.e. To correct market failure

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97
Q

Tax

A

a charge levied by the government to raise revenue

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98
Q

Indirect tax

A

a tax imposed on expenditure, producers (suppliers). It is a tax placed on a product and increases costs to firms

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99
Q

Ad valorem tax

A

an ad valorem tax is a percentage tax e.g. VAT is charged at 20% of the price

100
Q

Specific tax

A

a flat rate tax e.g. 50p per item

101
Q

Maximum price

A

a price set by the government which makes it illegal for firms to charge more than a certain amount for a given quantity

102
Q

Minimum price

A

a price floor on a good or service set by the government, below which it cannot fall

103
Q

Trade pollution permits

A

a pollution permit that can be bought and sold in the market. It allows the owner to pollute up to a certain limit

104
Q

State provision

A

a government funded good or service that is provided by the public sector or contracted out to the private sector

105
Q

Regulation

A

government laws and rules imposed on markets to influence the behaviour of consumers and producers

106
Q

Property rights

A

an economic agent has exclusive authority to decide how to use a resource

107
Q

Extension of property rights

A

allowing other stakeholders, often third parties, to have a say in how a resource is used

108
Q

Government failure

A

occurs when government intervention leads to an inefficient allocation of resources and a net loss welfare

109
Q

Distortion of price signals

A

the actions of government which distort the operation of the price mechanism and so misallocation or resources

110
Q

Unintended consequences

A

the actions of government that have effects that are unanticipated and not predicted by the policymaker

111
Q

Excessive administration costs

A

where costs that arise in the formation, monitoring and enforcing of governments measures are too high and above the benefits of the measure.

112
Q

Government information gaps

A

where the government has insufficient information to make rational economic decisions

113
Q

Agency problem

A

possible conflicts of interest that may result between the shareholders (principal) and the management (agent) of a firm

114
Q

Divorce of ownership from control -

A

firms are owned by shareholders, who have little say in the day to day running of the business, and controlled by managers; this leads to the principal-agent problem

115
Q

Barriers to entry

A

ways to prevent profitable entry of competitors- may relate to differences in costs between existing and new firms

116
Q

Barriers to exit

A

the costs associated with a decision to leave a market/ industry e.g. lost goodwill with customers

117
Q

Private sector

A

all privately owned businesses and organisations. These businesses usually aim to return a profit to the owners

118
Q

Public sector

A

Company owned by local or central government

119
Q

Profit organisation

A

most private sector organisations aim to make a profit to maximise financial benefits

120
Q

Not- for profit organisation

A

any profit they do make is used to support their aim of maximising social welfare and helping individuals and groups, charities

121
Q

Internal growth

A

growth as a result of a firms increasing the levels of factors of production it uses

122
Q

Organic growth

A

internal growth without resort to takeovers and mergers, achieved through expanding a product range, selling into new countries

123
Q

Inorganic growth

A

external growth as a result of takeovers and mergers

124
Q

Vertical integration

A

integration of firms in the same industry but at different stages in the production process

125
Q

Backward vertical integration

A

acquiring a business operating earlier in the supply chain e.g. retailer buys a wholesaler

126
Q

Forward vertical integration

A

acquiring a business further up the supply chain e.g. a vehicle manufacturer buys a car parts distributor

127
Q

Horizontal integration

A

when companies from the same industry amalgamate to form a larger company- firms at the same stage of the production process

128
Q

Conglomerate integration

A

combining firms which operate in completely different markets

129
Q

Merger

A

two or more firms join under common ownership

130
Q

Takeover

A

when one firm buys another.

131
Q

Hostile takeover

A

a takeover that’s not supported by the management of the company being acquired

132
Q

Synergy takeover

A

when the whole is greater than the sum of individual parts

133
Q

De-merger

A

a business strategy in which a single business is broken into two or more components, either to operate on their own, be sold or dissolved

134
Q

Diseconomies of scale

A

a business may expand in the long run may expand beyond the optimal size in the long run and experience diseconomies of scale. This leads to rising LRAC.

135
Q

Revenue

A

income generated from the sale of output in goods and services markets

136
Q

Revenue maximisation

A

when MR = zero (i.e. when price elasticity of demand = 1)

137
Q

Total revenue

A

refers to the amount of money received by a firm from selling a given level of output and is found by multiplying price (P) by output i.e. number of units sold

138
Q

Average revenue (AR) =

A

average price per unit sold

139
Q

Marginal Revenue (MR)=

A

The change in revenue from selling one extra unit of output

140
Q

Marginal revenue product

A

measures the change in total revenue for a firm from selling the output produced by additional workers employed

141
Q

Sales maximisation

A

AR=AC

142
Q

Profit maximisation

A

Profit maximisation occurs when marginal cost = marginal revenue (MC=MR)

143
Q

Variable cost

A

business costs that vary directly with output since more variable inputs are required to increase output

144
Q

Fixed costs

A

costs that don’t vary directly with level of output i.e. they are treated as exogenous or independent of production

145
Q

Marginal cost

A

the change in total costs from increasing output by one extra unit

146
Q

Satisficing behaviour

A

maximising behaviour may be replaced by satisficing which in essence involves the owners setting minimum acceptable levels of achievement in terms of revenue and profit.

147
Q

Allocative efficiency

A

value that consumers place on good or service = cost of resources used up in production. price = marginal cost.

148
Q

Productive efficiency

A

a business in a given market or industry reaches the lowest point of its average cost curve. Output is being produced at minimum cost per unit - efficient use of scarce resources, high level of factor productivity

149
Q

Dynamic efficiency

A

occurs over time- focuses on changes in the consumer choice available in a market together with the quality/performance of goods and services that we buy

150
Q

Business ethics

A

concerned with the social responsibility of management towards the firms major stakeholder, environ and society

151
Q

Competitive advantage

A

when a company has an advantage over another

152
Q

Corporate governance

A

practices, principles and values that guide a firm and its activities

153
Q

CSR

A

companies integrate social and environmental concerns into their businesses operation and in interaction with their stakeholders

154
Q

Multinational

A

company with subsidiaries or manufacturing bases in several countries

155
Q

Short termism-

A

when a business pursues the goal of maximising s/t profits due to fear of being taken over or having the stock market mark down the value

156
Q

Average fixed cost

A

TFC/ Q

157
Q

Marginal cost

A

the change in total costs from increasing output by one extra unit

158
Q

Cost synergies

A

cost savings that a buyer aims to achieve as a result of taking over or merging with another business

159
Q

Diminishing marginal productivity

A

As more of a variable factor (e.g. labour) is added to a fixed factor (e.g. Capital), a firm will reach a point where it has a disproportionate quantity of labour to capital and so marginal product of labour falls- raising marginal costs

160
Q

Long run

A

a period of time when all FOP are variable and business can change the scale in production

161
Q

Short run

A

a time period where at least one FOP is in fixed supply. Machinery= fixed

162
Q

Sunk costs

A

cannot be recovered if a business decides to leave an industry. The existence of sunk costs makes a market less contest

163
Q

Dynamic efficiency

A

occurs over time- focuses on changes in the consumer choice available in a market together with the quality/performance of goods and services that we buy

164
Q

Productive efficiency

A

a business in a given market or industry reaches the lowest point of its average cost curve. Output is being produced at minimum cost per unit - efficient use of scarce resources, high level of factor productivity

165
Q

Allocative efficiency

A

value that consumers place on good or service = cost of resources used up in production. price = marginal cost.

166
Q

Pareto efficiency

A

Where it is not possible for individuals, households, or firms to bargain or trade in such a way that everyone is at least as well off as they were before and at least one person is better off.

167
Q

Static efficiency

A

measures how much output can be produced from given resources and whether producers charge a price that reflects fairly the cost of the factors used to produce a product

168
Q

Static efficiency

A

measures how much output can be produced from given resources and whether producers charge a price that reflects fairly the cost of the factors used to produce a product

169
Q

X-inefficiency

A

a lack of competition may give a monopolist less incentive to invest in ideas. The actual unit cost of production is higher than cost we may see in competitive market

170
Q

R&D

A

spending by businesses towards the innovation, introduction and improvement of products and processes. greater dynamic efficiency

171
Q

Perfect competition

A

where prices reflect complete mobility of resources and freedom of entry and exit, full access to information by all participants, homogenous products, and the fact that no one buyer and seller has an adv

172
Q

Price taker

A

when a firm take the ruling market price as its demand curve

173
Q

Monopolistic competition

A

competition between companies whose products are similar but differentiated to allow each to benefit from monopoly pricing- demand is not perfectly elastic

174
Q

Non price competition-

A

competing not on the basis on price but quality, product, packaging, service

175
Q

Price maker

A

a business with price setting power- imperfectly competitive markets

176
Q

Product differentiation

A

a business seeks to distinguish what are essentially the same products by real/illusory means

177
Q

Marginal profit

A

the increase in profit when one more unit is sold or difference between MR and MC

178
Q

Monopoly profit

A

firm is said to reap monopoly profits when a lack of viable market competition allows it to set its prices above equilibrium without losing profits to competitors

179
Q

Normal profit

A

minimum amount of profit required to keep factors of production in their current use. AC not MC

180
Q

Supernormal profit

A

profit is above that required to keep the resources in their present use in the l/r (AR>AC)

181
Q

Shut down price

A

in the s/r firms will continue to produce as long as total revenue covers TVC P>AVC

182
Q

Barriers to entry

A

situation where there’s a single or few buyer(s) and seller(s) of a given product in a market

183
Q

Anti-competitive behaviour

A

strategies like predatory pricing, designed to limit the degree of competition in a market

184
Q

Concentration ratio

A

measures the proportion of an industry’s output or employment by the largest firms. high = monopoly, duopoly, oligopoly.

185
Q

First mover advantage

A

business that creates a new product- first into the market- comp adv- learning by doing – more difficult and costly for new firms to achieve profitable entry

186
Q

Oligopoly

A

a market dominated by a few producers

187
Q

Cartel

A

association of businesses or countries that collude to influence production levels and the market price of product(s)

188
Q

Collusion

A

when rival companies cooperate for their mutual benefit. 2 or more parties act together to influence production and or prices level- preventing fair comp. common in oligopoly/ duopoly

189
Q

Overt collusion

A

formal and open agreements between firms to undertake actions likely to minimise competitive response

190
Q

Tacit collusion

A

firms cooperate but not formally, secret, unspoken cooperation

191
Q

Heterogenous products

A

products differentiated by design, packaging, functionality, performance

192
Q

Interdependence

A

when actions of one firm has an effect on competitors (oligopoly)two or more things depend on another

193
Q

Kinked demand curve

A

assumes business might face a dual demand curve based on likely reactions of other firms in the market to a change in its price or another variable

194
Q

Late mover advantage

A

advantage a company gains by being one of the later entrants to sell a product or provide a service, when technology has improved and can be copied easily

195
Q

Game theory

A

when there are 2 or more interacting decision takers and each decision or combination of decisions involves particular outcome (knows as payoff)

196
Q

Nash equilibrium

A

the outcome of a game that occurs is when player A takes the best possible action given action of player B and player B takes the best possible action given action of player A

197
Q

Prisoner dilemma

A

a problem in game theory that demonstrated why 2 people might not cooperate even if it’s in their best interest to do so. No matter what the other player does, one will gain a greater payoff by playing defect

198
Q

Pay off matrix

A

used in game theory- table to simplify all possible outcomes of strategic decision

199
Q

Price war

A

vigorous comp between businesses often in s/t battle for MS and inc cash flow

200
Q

Monopoly

A

A market structure characterised by a single seller, selling a unique product in the market.

201
Q

Competitive tendering

A

system introduced in UK to force publicly run organisations to request bids from a number of different firms for contracts to supply goods or services

202
Q

Monopsony

A

As a firm grows in size it can purchase its factor inputs in bulk at negotiated discounted prices- particularly the case when a firm has monopsony (buying) power in the market

203
Q

Natural monopoly

A

A natural monopoly occurs when the most efficient number of firms in the industry is one.

204
Q

Sunk costs

A

cannot be recovered if a business decides to leave an industry

205
Q

First degree price discrimination

A

when individuals ae charged the exact price they are willing and able to pay

206
Q

Second degree price discrimination

A

involves businesses selling off packages of a product deemed to be surplus capacity at lower prices than the previously published/advertised price

207
Q

Third degree price discrimination

A

when individuals are charged different prices for the same products/ services, with there being no difference in cost of production

208
Q

Contestable market

A

threat of competition

209
Q

Derived demand

A

demand for a factor of production such as labour as a result of demand for the final predict that that FOP can produce

210
Q

Labour demand

A

number of workers employers are willing and able to employ at a given wage rate a given time period

211
Q

Human capital

A

The amount of skill, knowledge talent, experience and ability of workers. Can be inc through education and training

212
Q

Incentive scheme

A

motivational scheme for employees- to encourage inc productivity / efficiency / working to the company objectives. Examples = share schemes, bonuses, commission on sales, additional holiday, company car formal awards.

213
Q

Income

A

the flow of earnings to a factor of production. Labour earns wages. Capital earns interest. Land earns rent. Enterprise earns profit.

214
Q

Informal labour markets-

A

Also known as ‘grey* market, shadow economy, or black economy. This is the part of the economy that’S not taxed or regulated by GOV- doesn’t feature in GDP statistics for that country. People working in informal labour market = likely to be paid in cash, may undertake work such as domestic cleaning / gardening, babysitting, car- washing and is characterised by unstable employer-employee relationships. Informal work is often vitally important to the poor.

215
Q

Discouraged workers

A

people out of work for a long time who may give up on job search and effectively leave the labour market= become economically inactive. See hidden unemployment.

216
Q

Geographical mobility of labour

A

the ability of labour to move around an area, region or country in order to work. Geographical mobility is affected by things such as family ties, transport networks, transferable qualifications and common language.

217
Q

Labour supply (to an industry / occupation

A

the labour supply is number of hours people are willing and able to supply at a given wage rate. The labour supply curve for any industry or occupation = upward sloping. As wages rise, other workers enter this industry attracted by the incentive of higher pay.

218
Q

Compensating wage differentials-

A

Higher pay may be earned for relatively low skilled jobs if working conditions are unsociable, unpleasant or dangerous, whereas lower pay = earned for higher skill jobs if working conditions are nice, flexible and safe.

219
Q

Demographic changes

A

Any change in population e.g. in terms of average age dependency ratio, life expectancy, family structures, birth rates etc.

220
Q

Discrimination

A

the different treatment of people as a result of factors: age, gender, race, sexual orientation, ethnicity.

221
Q

Earnings

A

earnings are made up of rages plus overtime pay, bonuses and commission.

222
Q

Economic rent

A

any amount and by a FOP, such as labour, above minimum account they require to work in our current occupation.

223
Q

Economically inactive

A

These who are of working age but on neither in work nor actively seeking unpaid work.

224
Q

Effective marginal tax rate

A

tax rate on each extra £1 of income –considers impact of direct taxes (such as income tax) but also possible withdrawal of means tested welfare benefits if people take a paid job. High effective marginal tax rate = root cause of the U/E trap - disincentives to find work.

225
Q

Efficiency wage

A

as theory suggests it may benefit from support workers a wage higher than the marginal one of your products. Paying a higher wage improves workers morale - can lead to a high quality of people applying for new jobs as they become available.

226
Q

Elasticity of labour demand-

A

Elasticity of labour demand measures responsiveness of demand for labour (employment) when there is a change in the wage rate.

227
Q

Flexible labour market

A

Labour market that adjust quickly to changes in the demand for and supply of labour. Characteristics include flexible employment contracts and flexible pay.

228
Q

Full employment

A

when there are enough unfilled job vacancies for all the unemployed to take paid work.

229
Q

Gender pay gap

A

difference between male and female earnings, usually expressed as a percentage of male earnings. In the UK, the gender pay gap is on 20%

230
Q

Imperfectly competitive market

A

A Labour market in which workers or firms have the power to set and marginal revenue product theory. Imperfections in the labour market can include monopsony trade unions, discrimination, poor information and skills shortages which can transfer power to the workers (suppliers of labour) and allow them to demand higher wages in return for the labour.

231
Q

Labour market failure

A

A labour market in which there isn’t an efficient allocation of resources. Reasons for labour market failure- Discrimination, Economic Inactivity, skills shortages, action of trade unions, action of monopsony employers, Labour Immobility (geographical and occupational

232
Q

Labour market flexibility

A

speed and agility of a labour market to respond to a change in economy. Flexibility = essential for good supply side performance in economy. Flexibility = flexibility in terms of occupations, skills, location, number of hours work, pay arrangements et cetera

233
Q

Living wage

A

wage that provides enough money for a working person to live decently and provide for their family the wage rate is estimated to be £9 per hour outside of London and £11 per hour in London in 2019

234
Q

Maximum wage-

A

a wage set below equilibrium wage rate outcome would be excess demand for labour, labour shortage

235
Q

Migration

A

movement of people especially workers between countries

236
Q

Immigration

A

refers to people entering a country

237
Q

Emigration

A

refers to people leaving a country

238
Q

Net migration

A

refers to difference between number of people entering and leaving a country

239
Q

Minimum wage-

A

wage set above equilibrium wage rate outcome is excess supply

240
Q

Monopsony employer

A

a labour market structure in which the single powerful buyer of a particular type of labour e.g. main buyer of the nurses and doctors = NHS monopsony employer will tend to pay relatively lower wages unemployed your people than in highly competitive market

241
Q

NEET

A

A young person (usually between 16 and 24) who is Not in Employment, Education or training. There are around 900 000 NEETs in UK

242
Q

Nominal wages

A

also known as money wages: the actual hourly rate of pay - it is not adjusted for inflation.

243
Q

Pension

A

payment made to people who have retired from work in UK.

244
Q

Total physical product

A

total output of a given quantity of FOP

245
Q

Marginal physical product-

A

extra physical output of an extra unit of variable factor of production

246
Q

Marginal revenue product=

A

p * Marginal physical product

Economics (6 decks)

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