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A level Economics > Microeconomics Year 1 > Flashcards

Microeconomics Year 1 Flashcards

1
Q

Economics

A

The study of how scarce/limited resources are used in the world.

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2
Q

The economic problem

A

The problem of how to make the best use of limited or scarce resources

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3
Q

Economic goods

A

Goods that are scarce, i.e. there is not an unlimited supply of these goods

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4
Q

Microeconomics

A

The study of the behaviour of individuals, firms and governments in relation to the allocation of products and/or resources

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5
Q

Scarcity

A

When there is a limited amount of something

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6
Q

Macroeconomics

A

The study of the behaviour and performance of an economy as a whole

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7
Q

Free goods

A

Resources that are not usually seen as limited, such as sunlight or air

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8
Q

Positive statement

A

Factual statement that can be tested

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9
Q

Normative statement

A

Opinion–based statement that one might agree or disagree with

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10
Q

Economic agents

A

Key groups involved in the economic problem, including governments, firms and households

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11
Q

Rationality

A

Assumption that each economic agent acts in their own best interests

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12
Q

Factors of production

A

Land, labour, capital and enterprise, the building blocks needed for a business to operate

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13
Q

Reward for the factors of production

A

What needs to be returned by a business for using each of the factors of production; rent, wages, interest and profit

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14
Q

Incentive

A

Something that motivates an action. In economics, this usually relates to profit, prices and social welfare (the objectives of economic agents)

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15
Q

Planned economy

A

The government controls the factors of production and decided on the allocation of resources

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16
Q

Mixed economy

A

Combination of market forces and government policies that controls the allocation of resources

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17
Q

Market economy

A

Allocation of resources is decided by the interaction of supply and demand (market forces)

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18
Q

Opportunity cost

A

Cost of the next best alternative forgone (given up) when a decision is made

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19
Q

Trade-off

A

A sacrifice that is made in order to gain something

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20
Q

Specialisation

A

Focusing on one activity (or part of an activity) to be able to produce more efficiently

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21
Q

Division of labour

A

Splitting up a task into smaller activities to be able to produce more efficiently

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22
Q

Barter system

A

System of exchanging one product for another without the use of money as a medium of exchange

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23
Q

Demand

A

A consumer’s willingness and desire to purchase goods and services at a specific price

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24
Q

Individual demand

A

One consumer’s willingness and ability to purchase a product or service at a given price

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25
Market demand
The sum of all consumer's willingness and ability to purchase a product or service at a given set of prices
26
Demand curve
Relationship between the price of a product and the quantity demand by the market
27
Joint demand
When products are demand together. The products are complements
28
Competitive demand
When consumers demand one or the other product. The products are substitutes
29
Composite demand
When a product is demanded for multiple possible uses
30
Movement along the demand curve
Change in quantity demanded that results from a change in the price of a product
31
Contraction of demand
A decrease in the quantity demanded
32
Extension of demand
An increase in the quantity demanded
33
Increase in demand
A shift outward of the demand curve so that there is an increase in quantity demanded at every price
34
Decrease in demand
A shift inward of the demand curve so that there is a decrease in quantity demanded at every price
35
Supply
Ability and willingness of a firm to sell products at a given price
36
Individual supply
One business's willingness and ability to sell a product at a given price
37
Market supply
Sum of all business's willingness and ability to sell a product at a given set of prices
38
Supply curve
Relationship between the price of a product and the quantity supplied by businesses
39
Joint supply
When products are supplied together, often as a byproduct
40
Competitive supply
When producers choose to supply one or the other product with given factors of production
41
Movement along the supply curve
Change in quantity supplied that occurs from a change in the price of a product
42
Extension of supply
An increase in the quantity supplies
43
Contraction of supply
A decrease in the quantity supplied
44
Increase in supply
A shift outward of the supply curve so that there is an increase in quantity supplied at every price
45
Decrease in supply
A shift inward of the supply curve so that there is a decrease in quantity supplied at every price
46
Consumer surplus
Difference between the price consumers are willing and able to pay and the market price
47
Producer surplus
Difference between the price at which producers are willing and able to supply a product at and the market price
48
Market equilibrium
Point at which the quantity supplied is equal to the quantity demanded of a particular product
49
Market disequilibrium
Any situation where supply does not equal demand. This could be a scenario where there is excess supply or demand
50
Excess supply
Scenario in which the market price is too high, meaning there are unsold products in the market
51
Excess demand
Scenario in which the market price is too low, meaning there are unsatisfied consumers in the market
52
Ceteris paribus
Other things being equal– the assumption that everything else stays the same when looking at microeconomic models
53
Elasticity
Responsiveness of a change in one thing to a change in something else
54
Price elasticity of demand (PED)
Measures the responsiveness of demand after a change in price
55
Price elastic demand
When price changes, the quantity demanded changes by a larger proportion
56
Price inelastic demand
When price changes, the quantity demanded changes by a smaller proportion
57
Income elasticity of demand (YED)
Measures the responsiveness of demand after a change in income
58
Luxury good
A good for which when income changes, the quantity demanded will change by a larger proportion in the same direction
59
Normal good
When income changes, the quantity demanded of the good will change by a smaller proportion in the same direction
60
Inferior good
When income changes, the quantity demanded of this good will change by a smaller proportion in the opposite direction
61
Cross elasticity of demand (XED)
Measures the responsiveness of demand for one product to a change in the price of another product
62
Complement
A good with a negative XED. As the price of Product B increases, the quantity demanded of Product A decreases (and vise versa)
63
Substitute
A good with a positive XED. As the price of Product B increases, the quantity demanded of Product A also increases (and vise versa)
64
Price elasticity of supply (PES)
Measures the responsiveness of supply after a change in price
65
Price elastic supply
When price changes, the quantity supplied will change by a larger proportion
66
Price inelastic supply
When price changes, the quantity supplies will change by a smaller proportion
67
Utility
Benefit gained from consuming a product
68
Marginal utility
Benefit gained from consuming one more unit of a product
69
Total utility
Total benefit gained from consuming a product
70
Market failure
Failure of the market system to allocate resources efficiently
71
Externality
A cost or benefit to a third party that has not been accounted for in the market transaction
72
Positive externality (external benefit)
Benefit to a third party that has not been accounted for in the market transaction
73
Positive externality of consumption
Benefit to a third party that arises from consumption of a product. This benefit has not been accounted for in the market transaction.
74
Negative externality (external cost)
Cost to a third party that has not been accounted for in the market transaction
75
Negative externality of consumption
Cost to a third party that arises from consumption of a product. This cost has not been accounted for in the market transaction
76
Positive externality of production
Benefit to a third party that arises from production of a product. This benefit has not been accounted for in the market transaction
77
Negative externality of production
Cost to a third party that arises from production of a product. This cost has not been accounted for in the market transaction
78
Information failure
When consumers and/or producers do not have all of the information when making decisions, leading to market failure
79
Asymmetric information
When one party (consumers or producers) has more or better information about a product than the other party
80
Moral hazard
When one party (consumers or producers) changes their behaviour due to asymmetric information , which causes extra costs to the other party
81
Merit good
Good that is likely to be under consumed in a free market because the consumer does not anticipate all the benefits
82
Demerit goods
Good that is likely to be overconsumed in a free market because the consumer does not anticipate the lack of benefits
83
Public goods
Goods that have the characteristics of being non-excludable, non-rivalrous, non-rejectable and with zero marginal costs
84
Non-excludability
When potential customers cannot be prevented from consuming a good without paying for it
85
Non-rivalry
When consumption of a good does not prevent consumption by another person. Also known as non-diminishability.
86
Non-rejectability
When consumption cannot be prevented by a consumer
87
Zero marginal cost
When production of an additional unit does not add extra costs to the business
88
Free rider problem
Occurs when a person benefits from consuming a shared resources or good without paying for that good
89
Direct taxation (tax)
Amount levied on a business or an individual that must be paid to the government
90
Indirect taxation (tax)
Amount levied on a producer to increase the cost of a product
91
Subsidy
Amount paid to a business to produce products
92
Price control
A minimum or a maximum price for which a product must be sold
93
Buffer stock system
System of holding and releasing stock to maintain a market price despite supply fluctuations
94
Information provision
Act of informing the public about the true nature of a product or market
95
Competition policy
Legislation and regulation that aims to make a market more competitive
96
Government failure
When government intervention does not reduce market failure and may even increase it or introduce a new market failure in the market
97
Public/private partnership
Joint initiative between government and producer(s) in order to increase supply to a market
98
Legislation
In relation to the economy, laws that a government puts in place to govern the production and consumption of products
99
Regulation
Rules that are specific to an industry or market and that govern the production or consumption of a product within the industry/market
100
Tradeable pollution permits
System that forces producers to include the costs of pollution in their production decisions

A level Economics (2 decks)

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