Th1: Definitions 1 Flashcards
Ad valorem tax
An indirect tax imposed on a good where the value of the tax is dependent on the value of the good
Asymmetric information
where one party has more information than the other, leading to market failure
Capital
one of the four factors of production - goods which can be used in the production process
Capital goods
goods produced in order to aid production of consumer goods in the future
Ceteris paribus
all other things remaining the same
Command economy
all factors of production are allocated by the state, so they decide what, how and for whom to produce goods
Complementary goods
negative XED - if good B becomes more expensive, demand for good A falls
Consumer goods
goods bought and demanded by households and individuals
Consumer surplus
the difference between the price the consumer is willing to pay and the price they actually pay
Cross elasticity of demand
the responsiveness of demand for one good (A) to a change in price of another good (B)
% change in QD of A
—————————–
% change in P of B
Demand
the quantity of a good/service that consumers are willing and able to buy at a given price in a given moment of time
Diminishing marginal utility
for every additional unit consumed, there is a fall in consumer utility - explains why the demand curve is sloping down
Division of labour
when labour becomes specialised during the production process so each person does a specific task in cooperation with other workers
Economic problem
the problem of scarcity: wants are unlimited but resources are finite so choices have to be made
Efficiency
when resources are allocated optimally, so every consumer benefits and waste is minimised
