Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Economics definitions > Theme 1 > Flashcards

Theme 1 Flashcards

1
Q

ad valorem tax

A

a sale tax that is set at a percentage of the price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

adverse selection

A

a situation in which a person at risk is more likely to take out insurance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

allocative efficiency

A

achieved when society is producing an appropriate bundle of goods relative to consumer preferences

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

asymmetric information

A

a situation in which some participants in a market have better information about marked conditions than others

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

bounded rationality

A

a situation in which people’s ability to take rational decisions is limited by a lack of information or an inability to interpret the information that is available, perhaps because of weakness at computation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

capital goods

A

goods used as part of the production process, such as machinery or factory buildings

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

cartel

A

an agreement between firms in a market on price and output with the intention of maximising their joint profits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

ceteris paribus

A

a Latin phrase meaning ‘other things being equal’; it is used in economics when we focus on changes in One variable while holding other influences constant

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

command economy

A

an economy in which decisions on resource allocation are guided by the state

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

competitive market

A

a market in which individual firms cannot influence the price of the good or service they are selling, because of competition from other firms

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

complements

A

two goods are said to be complements if an increase in the price of one good causes the demand for the other good to fall

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

consumer goods

A

goods produced for present use (consumption)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

consumer surplus

A

the value that consumers gain from consuming a good or service over and above the price paid

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

consumption externality

A

an externality that affects the consumption side of a market, which may be either positive or negative

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

cross elasticity of demand (XED)

A

a measure of the sensitivity of quantity demanded of a good or service to a change in the price of another good

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

demand

A

the quantity of a good or service that consumers are willing and able to buy at any given price in a given period of time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

demand curve

A

a graph showing how much of a good will be demanded by consumers at any given price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

diminishing marginal utility

A

describes the situation where an individual gains less additional utility from consuming a product, the more of it is consumed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

division of labour

A

labour a process whereby the production procedure is broken down into a sequence of stages, and workers are assigned to a particular stage

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

elastic

A

a term used when the price elasticity of demand is greater than 1 but less than infinity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

elasticity

A

a measure of the sensitivity of one variable to changes in another variable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

external benefit

A

the benefit the that society receives over and above those that accrue to the individual engaged in an economic activity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

external cost

A

a cost associated with an individual’s (a firm or household’s) production or other economic activities, which is borne by a third party and is not reflected in market prices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

externality

A

a cost or a benefit that is external to a market transaction, and is thus not reflected in market prices, which may affect third parties not involved in the transaction

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
factors of production
resources used in the production process; inputs into production, particularly including labour, capital, land and enterprise
26
firm
an organisation that brings together factors of production in order to produce output
27
free market economy
an economy in which market forces are allowed to guide the allocation of resources
28
free-rider problem
When an individual cannot be excluded from consuming a good, and thus has no incentive to pay for its provision
29
government failure
a misallocation of resources arising from government intervention to correct a market failure that causes a less efficient allocation of resources and imposes a welfare loss on society
30
gross domestic product (GDP)
a measure of the economic activity carried out in an economy over a period The total value of goods and services produced by an economy
31
habitual behaviour
where consumers persist in acting in a particular way even when conditions have changed
32
herding
where people take decisions based on the actions of others, rather than on a rational evaluation Of the situation that they face
33
incidence of a tax
the way in which the burden of paying a Sales tax is divided between buyers and sellers
34
income elasticity of demand (YED)
a measure of the sensitivity of quantity demanded to a change in consumer incomes
35
indirect tax
a tax levied on expenditure on goods or services (as opposed to a direct tax, which is a tax charged directly to an individual based on a component of income)
36
inelastic
a term used when the price elasticity of demand is less than 1 but greater than zero
37
inferior good
one where the quantity demanded decreases in response to an increase in consumer incomes
38
internalising an externality
an attempt to deal with an externality by bringing an external cost or benefit into the price system
39
law of demand
a law that states that there is an inverse relationship between quantity demanded and the price of a good or service, ceteris paribus
40
luxury good
one for which the income elasticity of demand is positive, and greater that 1, such that as income rises, consumers spend proportionally more on the good
41
macroeconomics
the study of the interrelationships between economic variables at an aggregate (economy-wide) level
42
marginal analysis
an approach to economic decision making based on considering the additional (marginal) benefits and costs of a change in behaviour
43
marginal cost
the cost of producing an additional unit of output
44
marginal social benefit (MSB)
the additional benefit that society gains from consuming an extra unit of a good
45
market
a set of arrangements that allow transactions to take place
46
market-based policy
an approach to tackling market failure by using the market mechanism
47
market equilibrium
a situation that occurs in a market when the price is such that the quantity demanded by consumers is exactly balanced by the quantity supplied by firms
48
market failure
a situation in which the free market equilibrium does not lead to a socially optimal allocation of resources, such as that too much or too little of a good it being produced and/or consumed
49
microeconomics
the study of economic decisions taken by individual economic agents, including households and firms
50
mixed economy
an economy in which resources are allocated partly through price signals and partly on the basis of intervention by the side
51
model
a simplified representation of reality used to provide insight into economic decisions and events
52
moral hazard
a situation in which a person who has taken out insurance is prone to taking more risk
53
necessity
a good for which the income elasticity of demand is positive, and less than 1, such that as income rises, consumers spend proportionally less on the good
54
NIMBY (not in my back yard)
a syndrome under which people are happy to support the construction of an unsightly or unsocial facility, so long as it is not in their back yard
55
non-excludability
a situation in which it is not possible to provide a product to one person without allowing others to consume it as well
56
non-renewable resources
natural resources that once used cannot be replenished, such as coal or oil
57
non-rivalry
a situation in which one person's consumption of a good does not prevent others from consuming it as well
58
normal good
one where the quantity demanded increases in response to an increase in consumer incomes
59
normative statement
a statement that involves a value judgement about what ought to be
60
nudge theory
analysis that suggests that people's behaviour can be influenced by making desirable decisions easy to make
61
opportunity cost
in decision making, the value of the next best alternative forgone
62
perfectly elastic supply
a situation in which firms will supply any quantity of a good at the going price: elasticity of supply is infinite
63
perfectly inelastic supply
a situation in which firms can supply only a fixed quantity, so cannot increase or decrease the amount available: elasticity of supply is zero
64
'polluter pays' principle
an argument that a firm causing pollution should be charged the full external cost that they inflict on society
65
positive statement
a statement about what is (i.e. about facts)
66
potential economic growth
an expansion in the productive capacity of the economy
67
price elasticity of demand (PED)
a measure of the sensitivity of quantity demanded to a change in the price of a good or service
68
price elasticity of supply (PES)
a measure of the sensitivity of quantity supplied of a good or service to a change in the price of that good or service
69
price mechanism
a process by which resource allocation is influenced through rationing, incentives and signalling
70
price signal
where the price of a good carries information to producers or consumers that guides the market towards equilibrium and assists in resource allocation
71
private benefit
the benefit from an individual's (a firm or household's) economic activity that accrue to that individual
72
private cost
a cost incurred by an individual (firm or consumer) as part of its production or other economic activities
73
private good
a good that, once consumed by one person, cannot be consumed by somebody else; such a good has excludability and is rivalrous
74
producer surplus
the difference between the price received by firms for a good or service and the price at which they would have been prepared to supply that good or service
75
production externality
an externality that affects the production side of a market, which may be either positive or negative
76
production possibility frontier (PPF)
a curve showing the maximum combinations of goods or services that can be produced in a given period with available resources
77
prohibition
an attempt to prevent the consumption of a good by declaring it illegal
78
public good
a good that is non-exclusive and non-rivalrous in consumption - consumers cannot be excluded from consuming the good, and consumption by one person does not affect the amount of the good available for others to consume
79
regulation
intervention to tackle market failure by direct action to command and control behaviour
80
renewable resources
natural resources that can be replenished, such as forests that can be replanted, or solar energy that does not get used up
81
scarcity
a situation that arises when people have unlimited wants in the face of limited resources
82
social benefit
the sum of private benefits and external benefits
83
social cost
the sum of private and external costs
84
specific tax
a sales tax that is set at a constant amount per unit of sales
85
subsidy
a grant given by the government to producers to encourage production of a good or service
86
substitutes
two goods are said to be substitutes if the demand for one good is likely to rise if the price of the other rises
87
supply
the quantity of a good or service that producers are willing and able to sell at any given price in a given period of time
88
supply curve
a graph showing the quantity supplied at given price
89
symmetric information
a situation in which all participants in a market (buyers and sellers) have the same information about market conditions
90
tradable pollution
permit system a system for controlling pollution based on a market for permits that allow firms to pollute up to a limit
91
unitary elastic
a term used when the price elasticity of demand is equal to 1
92
value judgement
a statement based on your opinion or beliefs, rather than on facts

Economics definitions (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions