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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
Q

Market demand

A

The sum of all consumer’s willingness and ability to purchase a product or service at a given set of prices

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26
Q

Demand curve

A

Relationship between the price of a product and the quantity demand by the market

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27
Q

Joint demand

A

When products are demand together. The products are complements

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28
Q

Competitive demand

A

When consumers demand one or the other product. The products are substitutes

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29
Q

Composite demand

A

When a product is demanded for multiple possible uses

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30
Q

Movement along the demand curve

A

Change in quantity demanded that results from a change in the price of a product

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31
Q

Contraction of demand

A

A decrease in the quantity demanded

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32
Q

Extension of demand

A

An increase in the quantity demanded

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33
Q

Increase in demand

A

A shift outward of the demand curve so that there is an increase in quantity demanded at every price

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34
Q

Decrease in demand

A

A shift inward of the demand curve so that there is a decrease in quantity demanded at every price

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35
Q

Supply

A

Ability and willingness of a firm to sell products at a given price

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36
Q

Individual supply

A

One business’s willingness and ability to sell a product at a given price

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37
Q

Market supply

A

Sum of all business’s willingness and ability to sell a product at a given set of prices

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38
Q

Supply curve

A

Relationship between the price of a product and the quantity supplied by businesses

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39
Q

Joint supply

A

When products are supplied together, often as a byproduct

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40
Q

Competitive supply

A

When producers choose to supply one or the other product with given factors of production

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41
Q

Movement along the supply curve

A

Change in quantity supplied that occurs from a change in the price of a product

42
Q

Extension of supply

A

An increase in the quantity supplies

43
Q

Contraction of supply

A

A decrease in the quantity supplied

44
Q

Increase in supply

A

A shift outward of the supply curve so that there is an increase in quantity supplied at every price

45
Q

Decrease in supply

A

A shift inward of the supply curve so that there is a decrease in quantity supplied at every price

46
Q

Consumer surplus

A

Difference between the price consumers are willing and able to pay and the market price

47
Q

Producer surplus

A

Difference between the price at which producers are willing and able to supply a product at and the market price

48
Q

Market equilibrium

A

Point at which the quantity supplied is equal to the quantity demanded of a particular product

49
Q

Market disequilibrium

A

Any situation where supply does not equal demand. This could be a scenario where there is excess supply or demand

50
Q

Excess supply

A

Scenario in which the market price is too high, meaning there are unsold products in the market

51
Q

Excess demand

A

Scenario in which the market price is too low, meaning there are unsatisfied consumers in the market

52
Q

Ceteris paribus

A

Other things being equal– the assumption that everything else stays the same when looking at microeconomic models

53
Q

Elasticity

A

Responsiveness of a change in one thing to a change in something else

54
Q

Price elasticity of demand (PED)

A

Measures the responsiveness of demand after a change in price

55
Q

Price elastic demand

A

When price changes, the quantity demanded changes by a larger proportion

56
Q

Price inelastic demand

A

When price changes, the quantity demanded changes by a smaller proportion

57
Q

Income elasticity of demand (YED)

A

Measures the responsiveness of demand after a change in income

58
Q

Luxury good

A

A good for which when income changes, the quantity demanded will change by a larger proportion in the same direction

59
Q

Normal good

A

When income changes, the quantity demanded of the good will change by a smaller proportion in the same direction

60
Q

Inferior good

A

When income changes, the quantity demanded of this good will change by a smaller proportion in the opposite direction

61
Q

Cross elasticity of demand (XED)

A

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

62
Q

Complement

A

A good with a negative XED. As the price of Product B increases, the quantity demanded of Product A decreases (and vise versa)

63
Q

Substitute

A

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
Q

Price elasticity of supply (PES)

A

Measures the responsiveness of supply after a change in price

65
Q

Price elastic supply

A

When price changes, the quantity supplied will change by a larger proportion

66
Q

Price inelastic supply

A

When price changes, the quantity supplies will change by a smaller proportion

67
Q

Utility

A

Benefit gained from consuming a product

68
Q

Marginal utility

A

Benefit gained from consuming one more unit of a product

69
Q

Total utility

A

Total benefit gained from consuming a product

70
Q

Market failure

A

Failure of the market system to allocate resources efficiently

71
Q

Externality

A

A cost or benefit to a third party that has not been accounted for in the market transaction

72
Q

Positive externality (external benefit)

A

Benefit to a third party that has not been accounted for in the market transaction

73
Q

Positive externality of consumption

A

Benefit to a third party that arises from consumption of a product. This benefit has not been accounted for in the market transaction.

74
Q

Negative externality (external cost)

A

Cost to a third party that has not been accounted for in the market transaction

75
Q

Negative externality of consumption

A

Cost to a third party that arises from consumption of a product. This cost has not been accounted for in the market transaction

76
Q

Positive externality of production

A

Benefit to a third party that arises from production of a product. This benefit has not been accounted for in the market transaction

77
Q

Negative externality of production

A

Cost to a third party that arises from production of a product. This cost has not been accounted for in the market transaction

78
Q

Information failure

A

When consumers and/or producers do not have all of the information when making decisions, leading to market failure

79
Q

Asymmetric information

A

When one party (consumers or producers) has more or better information about a product than the other party

80
Q

Moral hazard

A

When one party (consumers or producers) changes their behaviour due to asymmetric information , which causes extra costs to the other party

81
Q

Merit good

A

Good that is likely to be under consumed in a free market because the consumer does not anticipate all the benefits

82
Q

Demerit goods

A

Good that is likely to be overconsumed in a free market because the consumer does not anticipate the lack of benefits

83
Q

Public goods

A

Goods that have the characteristics of being non-excludable, non-rivalrous, non-rejectable and with zero marginal costs

84
Q

Non-excludability

A

When potential customers cannot be prevented from consuming a good without paying for it

85
Q

Non-rivalry

A

When consumption of a good does not prevent consumption by another person. Also known as non-diminishability.

86
Q

Non-rejectability

A

When consumption cannot be prevented by a consumer

87
Q

Zero marginal cost

A

When production of an additional unit does not add extra costs to the business

88
Q

Free rider problem

A

Occurs when a person benefits from consuming a shared resources or good without paying for that good

89
Q

Direct taxation (tax)

A

Amount levied on a business or an individual that must be paid to the government

90
Q

Indirect taxation (tax)

A

Amount levied on a producer to increase the cost of a product

91
Q

Subsidy

A

Amount paid to a business to produce products

92
Q

Price control

A

A minimum or a maximum price for which a product must be sold

93
Q

Buffer stock system

A

System of holding and releasing stock to maintain a market price despite supply fluctuations

94
Q

Information provision

A

Act of informing the public about the true nature of a product or market

95
Q

Competition policy

A

Legislation and regulation that aims to make a market more competitive

96
Q

Government failure

A

When government intervention does not reduce market failure and may even increase it or introduce a new market failure in the market

97
Q

Public/private partnership

A

Joint initiative between government and producer(s) in order to increase supply to a market

98
Q

Legislation

A

In relation to the economy, laws that a government puts in place to govern the production and consumption of products

99
Q

Regulation

A

Rules that are specific to an industry or market and that govern the production or consumption of a product within the industry/market

100
Q

Tradeable pollution permits

A

System that forces producers to include the costs of pollution in their production decisions

A level Economics (2 decks)

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