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Economics A2 > Revision Unit: 3 > Flashcards

Revision Unit: 3 Flashcards

1
Q

Absolute Poverty

A

A state where a household or person is unable to purchase the basic necessities to sustain a civilised life

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2
Q

Allocative Efficiency

A

Where resources are used to produce what consumers actually want to buy i.e. where resources are allocated such that no consumer could be made better off without another consumer becoming worse off

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3
Q

Average Cost

A

The cost per unit

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4
Q

Average Revenue

A

The revenue per unit of output

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5
Q

Collusion

A

Where firms agree not to compete on price

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6
Q

Competition Policy

A

Government efforts to ensure firms do not exploit monopoly power

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7
Q

Concentration Ratio

A

The market share of the 5 largest firms in an industry

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8
Q

Consumers Surplus

A

Measures of consumer welfare: the maximum price a consumer is willing to pay for a good minus the market price

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9
Q

Contestable Market

A

An industry where there are no significant barriers to entry or exit (no sunk costs)

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10
Q

Cost Benefit Analysis

A

Technique to assess whether public sector projects are likely to produce net gains in welfare to society

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11
Q

Cost Plus Pricing

A

Where firms set price at average cost plus a profit margin, without explicit reference to estimated demand curve

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12
Q

Deadweight Loss

A

Net welfare loss from not producing at social optimal production

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13
Q

Deregulation

A

Removal of government regulations to allow the entry of private sector firms to compete in a market

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14
Q

Derived Demand for Labour

A

Means labour is only demanded because of the output it can produce and not because firms want workers in their own right

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15
Q

Diseconomies of Scale

A

The rise in unit cost as a firm expands its scale of production in the long run

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16
Q

Dynamic Efficiency

A

Occurs when resources are allocated efficiently over time

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17
Q

Elasticity of Demand for Labour

A

The responsiveness of demand for labour to a change in wage

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18
Q

Elasticity of Supply of Labour

A

The responsiveness of supply of labour to a change in wage

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19
Q

Fixed Costs

A

A cost which is independent of output in the short run

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20
Q

Horizontal Equity

A

The equal treatment of people in the same circumstances

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21
Q

Human Capital

A

The ability of workers to add value to production

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22
Q

Income Effect

A

The increased demand for leisure by an individual worker as wage rates rise because workers regard leisure as a normal good

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23
Q

Innovation

A

The ability to turn an invention into a marketable product or production process

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24
Q

Internal Growth

A

Self-financed growth of a company

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25
Q

Kinked Demand Curve

A

Demand curve facing an oligopolist which is relatively price elastic if price is raised but relatively price inelastic if price is reduced

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26
Q

Law of Diminishing Returns

A

The fall in marginal product that eventually results as additional units of the variable factors of production are added to the fixed factors

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27
Q

Limit Pricing

A

Where existing firms attempt to prevent new entry by pricing low so that new entrants will not make normal profits

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28
Q

Long Run

A

Period of time when all factors of production are variable

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29
Q

Marginal Cost

A

The addition to total cost from producing an extra unit of output

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30
Q

Marginal External Benefit

A

The additional (external) benefit to third parties from an extra unit of production

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31
Q

Marginal External Cost

A

The additional cost suffered by the third part from an extra unit of production

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32
Q

Marginal Private Benefit

A

The additional benefit to the consumers from an extra unit of production

33
Q

Marginal Private Cost

A

The addition to total cost to the firm from an extra unit of production

34
Q

Marginal Revenue

A

The addition to total revenue from producing an extra unit of output

35
Q

Marginal Revenue Product

A

The addition to total revenue from employing an extra worker

36
Q

Marginal Social Benefit

A

The additional benefit to society from an extra unit of production

37
Q

Marginal Social Cost

A

The additional cost to society (i.e. firm + third party) from an extra unit of production

38
Q

Market for Corporate Control

A

The competition for control of companies through takeovers

39
Q

Means Tested Benefits

A

Benefits which are only paid to households who can prove they are poor

40
Q

Merger

A

Joining of two previously separate firms into one

41
Q

Minimum Efficient Scale

A

The lowest output at which a firm can produce at the lowest unit costs possible for the given technology

42
Q

Monopsony

A

Single buyer in a market

43
Q

National Collective Bargaining

A

Where trade unions negotiate for wages and working conditions which must apply to its workers throughout the country

44
Q

National Minimum Wage

A

A floor below which wages cannot legally fall

45
Q

Non-Price Competition

A

Where firms attempt to make more profit without cutting price

46
Q

Normal Profit

A

The minimum (accounting) profit which the entrepreneur needs to stay in long term production

47
Q

Oligopoly

A

A market dominated by a few firms

48
Q

Optimal Tax

A

Tax equal to marginal external cost (persuading profit maximising firms to choose socially optimal production)

49
Q

Participation Rate

A

Proportion of those of working age who are in paid jobs or seeking them

50
Q

Perfect Competition

A

Market structure where there are very many buyers and sellers such that no individual can buy or sell at any price other than the going price

51
Q

Population of Working Wage

A

The school leaving age to retirement age

52
Q

Poverty Trap

A

The disincentive to work when someone on benefits faces a very high effective marginal rate of tax if they start work

53
Q

Predatory Pricing

A

A short run strategy where a firm undercuts rivals on price to below cost

54
Q

Price Discrimination

A

Where a firm sells identical products at different prices to different buyers

55
Q

Privatisation

A

The sale of state-owned industries to the private sector

56
Q

Producer Surplus

A

Measure of producer welfare: the surplus of market price received over the minimum price the producer would be prepared to accept

57
Q

Productive Efficiency

A

Where goods are produced at the minimum possible average cost

58
Q

Productivity

A

Output per factor input

59
Q

Profit Maximisation

A

Price and output are chosen to maximise supernormal profit

60
Q

Regulation

A

Rules from government requiring firms to modify their production techniques, output or price

61
Q

Regulator

A

Government agent responsible for setting maximum price and ensuring against abuse of monopoly power by those companies who face limited competition in product markets

62
Q

Regulatory Capture

A

where a regulated firm achieves softer regulation

63
Q

Relative Poverty

A

A state where a household or person is significantly poorer than the average for the rest of society

64
Q

Replacement Ratio

A

The ratio of unemployment benefits to average earnings

65
Q

Revenue Maximisation

A

Price and output are chosen to maximise total revenue

66
Q

Sales Maximisation

A

Price and output are chosen to maximise sales volume

67
Q

Satisficing

A

Managers aim to make a satisfactory profit

68
Q

Short Run

A

Period of time when at least one factor of production is fixed

69
Q

Socially Optimal Production

A

Output where Allocative efficiency is maximised

70
Q

Substitution Effect

A

The fall in demand for leisure by an individual worker as wage rates rise because leisure becomes more expensive in terms of opportunity cost

71
Q

Sunk Costs

A

A cost which cannot be recouped on exiting the industry

72
Q

Super Normal Profit

A

Profit in excess of normal profit

73
Q

Tradable Permit

A

A legal right to pollute a fixed amount which can be bought or sold between firms

74
Q

Trade Unions

A

An organisation of workers financed by membership fees which aims to further the interests of its members (e.g. negotiating with management to improve wages and working conditions, a trade union may be a monopoly seller of labour

75
Q

Variable Costs

A

A cost which is related to output produced in the short run

76
Q

Vertical Equity

A

The notion which can be used to justify taxing richer people more to bring about greater ‘fairness’

77
Q

Wealth

A

The value of an individual’s assets at a point in time

78
Q

Workforce

A

All those of working age either in paid jobs or seeking them

Economics A2 (5 decks)

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