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Economic Key Defintions (Year 12) > Microeconomics (theme 1) > Flashcards

Microeconomics (theme 1) Flashcards

1
Q

Ad valorem tax

A

An indirect tax imposed on a good.

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2
Q

Asymmetric information

A

When one party has more information that the other, leading to marker failure.

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3
Q

Capital

A

Goods which can be used in the production process

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4
Q

Capital goods

A

Goods produced in order to aid production of consumer goods.

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5
Q

Ceteris Paribus

A

All things factors held constant.

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6
Q

Command economy

A

All factors of production are allocated by the system.

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7
Q

Complementary goods

A

Negative XED: if good B becomes more expensive, demand for good A falls.

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8
Q

Consumer goods

A

Goods bought and demanded by households and individuals

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9
Q

Consumer surplus

A

The difference between the price the consumer is willing to pay and the price they actually pay.

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10
Q

Cross elasticity of demand (XED)

A

%change in QD of A/%change in P of B.

The responsiveness of demand for one good (A) to a change in price of another good (B).

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11
Q

Demand

A

The quantity of goods that consumer are able and willing to buy at a given price at a given moment.

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12
Q

Diminishing marginal utility

A

The extra benefit gained from consumption of a goods generally declined as extra units are consumed: Why the demand curve is downward sloping.

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13
Q

Division of labour

A

When labour becomes specialised during the production process so do a specific talk in cooperation with other workers.

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14
Q

Economics problem

A

Wants are unlimited but resources are finite so choices have to be made.

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15
Q

Efficieny

A

When recourse are allocated optimally , so every consumer benefits and waste is minimised.

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16
Q

Enterprise

A

The ability to combine the three factor of production

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17
Q

Equilibrium price/quantity

A

Where demand=supply so there are no more marker forced bring about change to price or quantity demanded.

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18
Q

Excess demand

A

When price is set too low so demand is greater than supply

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19
Q

Excess supply

A

When price is set too high so supply is greater than demand.

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20
Q

Externalities

A

The cost or benefit a third party received from an economic activity inside the price mechanism.

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21
Q

Free market

A

An economy where the market mechanism allocated recourses.

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22
Q

Free rider principle

A

People who do not pay for a public good still receive benefits from it so the private sector will under-provide the good as they cannot make a profit.

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23
Q

Government failure

A

When government intervention leads to a net welfare loss in society.

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24
Q

Habitual Beauvoir

A

When the consumers are in the habit of making certain decisions.

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25
Q

Incidence of tax

A

Taxes on expenditure which increase production costs and lead to a fall in supply.

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26
Q

Inferior goods YED<0

A

Goods which see a fall in demand when price increases.

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27
Q

Information gap

A

When an economic agent lacks the information needed to make an informed decision.

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28
Q

Information provision

A

When the government intervenes to provide information to correct failure.

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29
Q

Labour

A

Human capital

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30
Q

Land

A

Natural resources such as oil, coil, wheat and physical space.

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31
Q

Luxury goods

A

An increase in income chases an even bigger increase in demand. YED>1

32
Q

Market failure

A

When the free market fails to allocate refocuses efficiently.

33
Q

Market forces

A

Forces in free markets which act to reduce prices when there is excess supply and increase then when there is excess demand.

34
Q

Maximum price

A

A price which a firm cannot charge above.

35
Q

Minimum price

A

A price which a firm cannot charge below

36
Q

Mixed economy

A

Both the free market mechanism and the government allocate resources.

37
Q

Positive statement

A

A hypothesis which can be proven or tested by evidence.

38
Q

Negative externalities of production

A

Where the social costs of production a good are great than the private costs of producing a good.

39
Q

Non-excludable

A

Someone cannot be prevented from using the good.

40
Q

Non-renewable resources

A

Resource which cannot be readily replenished or replaced at a level equal to consumption.

41
Q

Non rivalry

A

One persons use of the goods does not prevent. Some one else from using it.

42
Q

Normal goods

A

Demand increase as income increase YED>0.

43
Q

Normative statement

A

Subjective statements based on value judgements and opinions, cannot be proven.

44
Q

Opportunity cost

A

The benefit given up of the next best alternative.

45
Q

Perfectly price elastic good.

A

PED/PES=infinity. Qd/Qs does not change when price changes.

46
Q

Perfectly price Inelastic good

A

PED/PES=0. Qd/Qs does not change when price changes.

47
Q

Positive externalities of consumption

A

Where the social benefits of consuming a good are larger that the private benefits of consuming that good.

48
Q

PPF

A

Depicts the maximum production potential of an economy using a combination.

49
Q

Price elasticity of demand (PED)

A

The responsiveness of demand to a change in price %change in QD

50
Q

Price elasticity of supply (PES)

A

The responsiveness of supply to a change a price.

%change in QD/%change in P.

51
Q

Price mechanism

A

The system of resource allocation based on the free market movement of prices.

52
Q

Private cost/benefit

A

The cost/benefit to the individual participating in the economics activity.

53
Q

Private goods

A

Goods that are rivalry and excludable

54
Q

Producer surplus

A

The difference between the price the producer is willing to charge and price they actually charge.

55
Q

Public goods

A

Good that are non-excludable and non-rivalrous

56
Q

Rationally

A

Decision-making that leads to economics agents maximising their utility

57
Q

Regulation

A

Laws to address market failure and promote competition between firms

58
Q

Relatively price Elastic good

A

When PED/PES>-1.

Demand/supply is relativity responsive to a change in price so a small change in price leads to a large change in Qd/Qs.

59
Q

Relative price inelastic good

A

PED/PES>1. Demand/supply is relatively unresponsive to a change in price so a large change in price leads to a large change in QD/QS.

60
Q

Renewable resources

A

Resources which can be replenished.

61
Q

Scarcity

A

The shortage or rescues in relation to the quantity of human wants

62
Q

Social cost/benefit

A

The cost/benefit to society as a whole during economic activity

63
Q

Social optimum position

A

Where social costs equals socials benefits.

64
Q

Social science

A

The study of societies and human behaviour

65
Q

Specialisation

A

The production of limited goods by a company/country/individual, meaning they have to trade with other

66
Q

Specific tax

A

A tax imposed on a good where the value of the tax is dependent on the quantity that is bought

67
Q

State provision of goods

A

The government provides public goods or merit goods which are underprovided in the free market

68
Q

Subsidy

A

A grant from the government to a producer to increase supply of a good.

69
Q

Substitutes

A

If B good becomes more expensive, demand for good A rises.

70
Q

Supply

A

The ability and willingness to provide a particular good/service at a given price at a given moment in time.

71
Q

Symmetric information

A

Where buyers and sellers both have access to the same information

72
Q

Trade pollution permits

A

Licences which allow business to pollute up to a certain amount. Business are allowed to sell and buy permits which means there may be inferior road rudder the amount they pollute.

73
Q

Unitary price elastic good

A

When PED/PES=1. A change in price leads to a change in output by the same proportion

74
Q

Utility

A

The satisfaction derived from consuming a good.

75
Q

Weakness at computation

A

When consumers are bad at working out future benefits/costs.

Economic Key Defintions (Year 12) (2 decks)

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