Th1: Definitions 4 Flashcards
Price elasticity of supply (PES)
The responsiveness of quantity supplied to a change in price
Price mechanism
the system of resource allocation based on the free market movement of prices, determined by the supply and demand curves
Private cost/benefit
the cost/benefit to the individual participating in the economic activity
Private goods
goods that are rivalry and excludable
Producer surplus
the difference between the price the producer is willing to charge and the price they actually charge
Public goods
goods that are non-excludable and non-rivalry
Rationality
decision-making that leads to economic agents maximising their utility
Regulation
laws to address market failure and promote competition between firms
Relatively price elastic goods
when PED/PES > 1
demand/supply is relatively responsive to a change in price so a small change in price leads to a large change in quantity demanded/supplied
Relatively price inelastic goods
when PED/PES < 1
demand / supply is relatively unresponsive to a change in price so a large change in price leads to a large change in quantity demanded / supplied
Renewable resources
resources which can be replenished so the stock of resources can be maintained over a period of time
Scarcity
the shortage of resources in relation to the quantity of human wants
Social cost / benefit
the cost/benefit to society as a whole due to the economic activity
Social optimum position
where social costs equals social benefits - the amount which should be produced / consumed in order to maximise social welfare
Social science
the study of societies and human behaviour
