Section A Flashcards
Principle agent problem
Principal agent problem is an asymmetric problem that stems from a divorce between ownership and control that is found in many businesses and other organisations as a result of having different objectives.
Productively efficient
Allocatively efficient
Cost-benefit analysis
A decision making tool accounting for the social costs and social benefits of projects over time to establish a net present value which has four stages to compelte.
Internalising Externalities
Transfering costs that are currently paid by those who do not cause them to those who are responsible
Internalising Externalities
Transfering costs that are currently paid by those who do not cause them to those who are responsible
Economic growth
An increase in the amount of goods and services ( or real GDP ) produced over a period of time
Economic development
The process of importing people’s economic well-being and quality of life
Related to but distinct from economic growth
Economic growth can lead to economic development by improving the standard of living, output, employment and income
Marginal revenue product
The additional to totall revenue as a result of employing one more worker
Equity
The idea of fairness or justice, such as in terms of the distribution of output
Equality
The idea of all members of a group or society having the same rights and responsibilities
Prisoner’s deilemma
A prisoner’s dilemma is a situation where individual decision-makers always have an incentive to choose in a way that creates a less than optimal outcome for the individuals as a group.
Behavioural economics
The branch of economics that attempts to explain the decisions and choices individuals make in practice .
Dynamic efficiency
GDP
gni
The total output produced by a country’s citizens wherever they produce it
Ways of calculating GDP 3
Output method
income method
expenditure method
MEW (MEASURABLE ECPNOMIC WELFARE),
A composite measure of living standards that adjusts GDP for factors that reduce living standards that improve living standards
HDI human development index
A composite measure of living standards that includes gni per head, education and life expectancy
MPI multidimensional poverty index
Measures the deprivation in terms of the proportion of households that lack the requirements for a reasonable standard of living
Nudge Theory
Nudge Theory is based upon the idea that by shaping the environment, also known as the choice architecture, one can influence the likelihood that one option is chosen over another by individuals. A key factor of Nudge Theory is the ability for an individual to maintain freedom of choice and to feel in control of the decisions they make.
