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Economics AS (Microeconomics) > Microeconomics: Key terms and definitions to memorise > Flashcards

Microeconomics: Key terms and definitions to memorise Flashcards

1
Q

Arithmetic mean

A

the sum of the items divided by the number of items

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2
Q

Weighted average

A

an average that takes into account the relative importance of the different items.

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3
Q

Time series

A

information shown at successive points or intervals of time

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4
Q

Index number

A

a number showing the variation in, for example, wages or prices, as compared with chosen base period or date.

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5
Q

Economics

A

the study of how to allocate scarce resources in the most effective way

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6
Q

Household

A

group of people whose spending decisions are connected

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7
Q

Economic problem

A

how to allocate scarce resources among alternative uses

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8
Q

Microeconomics

A

The study of how households and firms make decisions in markets

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9
Q

Macroeconomics

A

the study of issues that affect economics as a whole

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10
Q

Model

A

a simplified view of reality that is used by economists as a means of explaining economic relationships

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11
Q

Factor of Production

A

The resource inputs that are available in an economy for the production of goods and services

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12
Q

Goods

A

tangible products, i.e. products that can be seen and touched, such as cars, food, washing machines

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13
Q

Services

A

intangible products, i.e. products that cannot be seen or touched, such as beauty therapy and insurance

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14
Q

Land

A

natural resources in an economy

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15
Q

labour

A

the quantity and quality of human resources

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16
Q

Capital

A

man-made aids to production

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17
Q

Entrepreneurship

A

the willingness of an entrepreneur to take risks and organise production

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18
Q

Entrepreneur

A

someone who bears the risks of the business and who organises production

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19
Q

Factor endowment

A

the stock of factors of production

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20
Q

production

A

the output of goods and services

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21
Q

Want

A

anything you would like, irrespective of whether you have the resources to purchase it

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22
Q

Scarcity

A

a situation where there are insufficient resources to meet all wants

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23
Q

Choice

A

The selection of appropriate alternatives

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24
Q

Opportunity cost

A

the cost of the (next) best alternative, which is forgone when a choice is made

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25
Q

Factor endowment

A

the stock of factors of production

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26
Q

Production

A

the output of goods and services

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27
Q

Specialisation

A

The concentration by a worker or workers, firm, region or whole economy on a narrow range of goods and services

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28
Q

Exchange

A

The process by which goods and services are traded

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29
Q

Subsidy

A

a payment by a governing body to encourage the production or consumption of a product

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30
Q

Division of labour

A

the specialisation of labour where the production process is broken down into separate tasks

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31
Q

Productivity

A

output or production of a good or service, per worker

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32
Q

Production possibility curve

A

this shows the maximum quantities of different combinations of output of two products, given current resources and the state of technology

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33
Q

Developed economy

A

an economy with a high level of income per head

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34
Q

Developing economy

A

an economy with a relatively low level of income per head

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35
Q

Trade-off

A

‘the calculation involved in deciding on whether to give up one good for another

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36
Q

Economic growth

A

change in the productive potential of an economy

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37
Q

productive potential

A

the maximum output than an economy is capable of producing

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38
Q

Economic system

A

the way in which production is organised in a country or group of countries

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39
Q

Market economy

A

an economic system whereby resources are allocated through the market forces of demand and supply

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40
Q

price system

A

a method of allocating resources by the free movement of prices

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41
Q

Supply

A

the quantity of a product that producers are willing and able to provide at different market prices over a period of time

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42
Q

Demand

A

the quantity of a product that consumers are able and willing to purchase at various prices over a period of time

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43
Q

Command economy

A

an economic system in which most resources are state owned and also allocated centrally

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44
Q

Mixed economy

A

‘an economic system in which resources are allocated through a mixture of the market and direct public sector involvement

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45
Q

Market

A

where or when buyers and sellers meet to trade or exchange products

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46
Q

sub-market

A

a recognised or distinguishable part of a market. Also known as a market segment.

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47
Q

demand

A

the quantity of a product that consumers are able and willing to purchase at various prices over a period of time.

48
Q

notional demand

A

the desire for a product

49
Q

Effective demand

A

the willingness and ability to buy a product

50
Q

Ceteris Paribus

A

assuming other variables remain unchanged

51
Q

demand curve

A

this shows the relationship between the quantity demanded and the price of a product

52
Q

demand schedule

A

the data that is used to draw the demand curve for a product

53
Q

Movement along the demand curve

A

this is in response to a change in the price of a product

54
Q

consumer surplus

A

the extra amount that a consumer is willing to pay for a product above the price that is actually paid

55
Q

Disposable income

A

Income after taxes on income have been deducted and state benefits have been added

56
Q

real disposable income

A

income after taxes on income have been deducted and state benefits have been added and the result has been adjusted to take into account changes in the price level

57
Q

Normal goods

A

goods for which an increase in income leads to an increase in demand

58
Q

inferior goods

A

goods for which an increase in income leads to a fall in demand

59
Q

substitute

A

competing goods

60
Q

complements

A

goods for which there is joint demand

61
Q

change in demand

A

this is where a change in a non-price factor leads to an increase or decrease in demand for a product

62
Q

supply

A

the quantity of a product that producers are willing and able to provide at different market prices over a period of time

63
Q

proft

A

the difference between the total revenue of a producer and the total cost

64
Q

supply curve

A

this shows the relationship between the quantity supplied and the price of a product

65
Q

supply schedule

A

the data used to draw up the supply curve of a product

66
Q

producer surplus

A

the difference between the price a producer is willing to accept and what it is actually paid

67
Q

Change in supply

A

occurs when a change in a non-price influence leads to an increase or decrease in the willingness of a producer to supply a product

68
Q

price

A

the amount of money that is paid for a given amount of a particular good or service

69
Q

equilibrium price

A

the price where demand and supply are equal

70
Q

clearing price

A

same as equilibrium price

71
Q

equilibrium quantity

A

the quantity that is demanded and supplied at the equilibrium price

72
Q

disequlibrium

A

any position in the market where demand and supply are not equal

73
Q

surplus

A

an excess of supply over demand

74
Q

shortage

A

an excess of demand over supply

75
Q

elasticity

A

the extent to which buyers and sellers respond to a change in market conditions

76
Q

price elasticity of demand

A

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

77
Q

price elastic

A

where the percentage change in the quantity demanded is sensitive to a change in price

78
Q

price inelastic

A

where the percentage change in the quantity demanded is insensitive to a change in price

79
Q

income elasticity of demand

A

the responsiveness of demand to a change in income

80
Q

normal goods (in terms of elasticity)

A

goods with positive income elasticity of demand

81
Q

income inelastic

A

goods for which a change in income produces a less than proportionate change in demand

82
Q

income elastic

A

goods for which a change in income produces a greater proportionate change in demand

83
Q

inferior goods

A

goods for which an increase in income leads to a fall in demand

84
Q

cross elasticity of demand

A

the responsiveness of demand for one product in relation to a change in the price of another product

85
Q

price elasticity of supply

A

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

86
Q

efficiency

A

where the best use of resources is made for the benefit of consumers

87
Q

alocative efficiency

A

where consumer satisfaction is maximised

88
Q

market faliure

A

where the free market mechanism fails to achieve economic efficiency

89
Q

Productive efficiency

A

where production takes place using the least amount of scarce resources

90
Q

economic efficiency

A

where both allocative and productive efficiency are achieved

91
Q

inefficiency

A

any situation where economic efficiency is not achieved

92
Q

free market mechanism

A

the system by which the market forces of demand and supply determine prices and the decisions made by consumers and firms

93
Q

information faliure

A

a lack of information resulting in consumers and producers making decisions that do not maximise welfare

94
Q

asymmetric information

A

information not equally shared between two parties

95
Q

externality

A

an effect whereby those not directly involved in taking a decision are affected by the actions of others

96
Q

third party

A

those not directly involved in making a decision

97
Q

private costs

A

the costs incurred by those taking a particular action

98
Q

private benefits

A

the benefits directly accruing to those taking a particular action

99
Q

external costs

A

the costs that are the consequence of externalities to third parties

100
Q

external benefits

A

the benefits that accrue as a consequence of externalitites to third parties

101
Q

social costs

A

the total costs of a particular action

102
Q

social benefits

A

the total benefits of a particular action

103
Q

negative externality

A

this exists where the social cost of an activity is greater than the private cost

104
Q

postitive externality

A

this exists where the social benefit of an activity exceeds the private benefit

105
Q

merit goods

A

these have more private benefits than their consumers actually realise

106
Q

demerit goods

A

their consumption is more harmful than is actually realised

107
Q

public goods

A

goods that are collectively cosumed and have the characteristics of non-excludability and non-rivalry

108
Q

non-excludabilitiy

A

situation existing where individual consumers cannot be excluded from consumption

109
Q

free rider

A

someone who directly benefits from the consumption of a public good but who does not contribute towards its provisision

110
Q

non-rivalry

A

situation existing where consumption by one person does not affect the consumption of all others

111
Q

quasi public goods

A

goods having some but not all of the characteristics of a public good

112
Q

direct tax

A

one that taxes the income of people and firms and that cannot be avoided

113
Q

indirect tax

A

a tax levied on goods and services

114
Q

polluter pays principle

A

any measure such as a green tax whereby the polluter pays explicitly for the pollution caused

115
Q

subsidy

A

a payment, usually from the government, to encourage production or consumption

116
Q

tradable permit

A

a permit that allows the owner to emit a certain amount of pollution and that, if unused or only partially used, can be sold to another polluter

Economics AS (Microeconomics) (9 decks)

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