Test 1 Flashcards
non-renewable resources
resources that once used will never be replenished and will run out one day.
renewable resources
resources that can be used and replaced/recreated. Won’t run out e.g. trees and water
consumer goods
goods and services that are used by people to satisfy their needs and wants
capital goods
goods that are used in the production of other goods, such as factories, offices, roads, machines, and equipment.
Specialization
the production of a limited range of goods by an individual, firm or country in co-operation with others so that together a complete range of goods is produced
division of labour
the specialization of workers who perform different tasks, at different stages of production, to make a good or service in co-operation with other workers.
productivity
output per unit of input employed
labour productivity
output per worker
capital productivity
output per unit of capital employed
Public sector
the state or government sector of the economy
Private sector
the part of the economy owned by private individuals, firms, and charities
Money
anything that is widely accepted as payment for goods and services performed or repayment of past debt.
What are the functions money have to fulfill
- Medium of exchange
- Measure of value
- A store of value
- A method of deferred payment
Barter economy
an economy that has no money rather exchange is conducted directly by swapping one good with another.
Double-coincidence of wants
Where each party to the transaction wants what the other has to trade
Assets
resources owned by a business or an economic entity
Market mechanism
is what allocates resources through bringing together buyers and sellers who agree on a price for the product or resource being sold
Consumer welfare
is the level of well-being or prosperity or living standards if an individual or group of individuals such as a country
Utility
the satisfaction or benefit derived from consuming a good or a set of goods
resources (econ)
Production inputs/factors of production
productively inefficient
is where it is possible to produce more without an opportunity cost as resources aren’t fully and/or efficiently used up
How do PPF curves shift outwards (increase production)?
Increase the quantity and/or the quality of their factors of production
Demand (effective)
The quantity of a good or service consumers are willing and able to buy at a given price in a given time period
Supply
The quantity of a good or service suppliers are willing to produce at a given price in a given time period
What affects the supply curve?
PINTS WC : Productivity Indirect Tax No. Firms Technology Subsidy Weather Cost of production
price mechanism
is the market and performs 4 functions: ARSI
it ALLOCATES scarce resources by RATIONING excess demand/supply by signaling to suppliers that prices are either too high or too low, who have the incentive to change prices in hopes to maximize profit rates
Consumer surplus
This is the difference between the price consumers are willing and able to pay for a good/service and what they actually do pay. This is the region under the demand curve and above the price line. This illustrates the extent of consumer welfare.
Producer surplus
The difference between the price producers are willing and able to supply a good/service for and the price they actually receive. It is the region above the supply curve and under the price line. This illustrates the extent of producer welfare.
Society surplus
society surplus is the sum of consumer and producer surplus (Consumer surplus + producer surplus)
What are the factors affecting the elasticity of demand?
SPLAT: Substitutes Percentage of income Luxury/necessity Time period
What affects the elasticity of supply?
Pssst : Production Lag Stocks Spare Capacity Substitutability of Factors of production Time
production lag
Time lags occur in production, particularly in agriculture, when decisions about the quantity to be produced are made well ahead of the actual sale. Demand and the price may change in the interval, creating a problem for the producer.
Spare Capacity
the ability of a supplier to produce more of a product that is now being produced
bumper yields
occurs within agriculture where crop yields an unusually productive harvest. This may be due to good weather.
XED (cross elasticity of demand)
measures the responsiveness of a good or service given a change in the price of another
Substitutes
these are goods that can be replaced by another to satisfy a want. These have a positive XED with each other.
Complements
These are goods that are purchased with other goods to satisfy a want. These have a negative XED.
Buffer Stock
Buffer Stock is a policy used by the government to stabilize fluctuating commodity prices to protect both producers (if the price goes too low) and consumers (if the price goes too high)
rational consumers
are assumed in behavioral economics to make decisions in accords to maximizing utility
minimum price
The lowest price firm can charge on consumers. This is done to protect suppliers from low prices and therefore income, this also may lead to an expansion within the market.
It may also be used to affect profitability where a non-garunteed minimum price is placed and profitability
is affected by the business causing firms to exit the market/
de-merit good
a good or service whose consumption is considered to be bad for you
merit good
a good or service whose consumption is considered to be good for you
indirect tax
a tax on expenditure that increases costs of production, this may be put in order to discourage the production of the good or service.
ad valorem tax
a tax charged as a percentage of the good and so increases as price increases
specific/unit tax
a tax charged on volume
External cost
cost external to an exchange where a negative third part effect is invoked as a spillover from production or consumption. This is a cost that the price mechanism fails to take into account and is the difference between social and private costs.
External Benefits
where third parties of a transaction are positively affected by a transaction and are where social benefits exceed private benefits
Government Failure
is where government intervention in a market leads to a less efficient allocation of resources and greater welfare loss as he cost related to the government intervening is greater than the benefits derived
Maximum price
This is the highest price firms are able to charge on consumers and is set in order to make a good/service more affordable to consumers.
Information Gaps
where buyers or sellers do not have access to the information needed to make a fully informed decision
Asymmetric information
where one group has superior information to other groups in a transaction.
Subsidies
government payments/ grants to encourage the production of a good
