Th1: Definitions 3 Flashcards
Market forces
forces in free markets which act to reduce prices when there is excess supply and increase them when there is excess demand
maximum price
a ceiling price which a firm cannot charge above
Minimum price
a floor price which a firm cannot charge below
Mixed economy
both the free market mechanism and the government allocate resources
Model
a hypothesis which can be proven or tested by evidence - tends to be mathematical whilst a theory is in words
Negative externalities of production
where the social costs of producing a good are greater than the private costs of producing the good
Non-excludable
a characteristic of public goods - someone cannot be prevented from using the good
Non-renewable resources
resources which cannot be readily replenished or replaced at a level equal to consumption - the stock level decreases over time as they are consumed
Non-rivalry
a characteristic of public goods - one person’s use of the good does not prevent someone else from using it
Normal goods
YED > 0
demand increases as income increases
Normative statement
subjective statements based on value judgements and opinions - cannot be proven or disproven
Opportunity cost
the value of the next best alternative forgone
Perfectly price elastic good
PED/PES = infinity
quantity demand/supplied falls to 0 when price changes
Perfectly price inelastic good
PED/PES = 0
quantity demanded/supplied does not change when price changes
Positive externalities of consumption
where the social benefits of consuming a good are larger than the private benefits of consuming that good
