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Economics > Theme 1 > Flashcards

Theme 1 Flashcards

1
Q

ceteris paribus

A

all other things being equal

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2
Q

normative statements

A

those which are value based and involve opinions

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3
Q

positive statements

A

a statement which can be supported with experience and fact

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4
Q

absolute advantage

A

being able to produce more of something than another country

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5
Q

comparative advantage

A

being able to produce something at a much lower opportunity cost than another country

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6
Q

advantages of specialisation

A

-increased output
-less wastage
-lower unit costs
-encourage investment

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7
Q

disadvantages of specialisation

A

-increased boredom
-finite recourses
-political
-overreliance

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8
Q

advantages of division of labour

A

-best quality
-efficient
-wide range of expert

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9
Q

disadvantage of division of labour

A

-boredom
-overreliance

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10
Q

positive of Adam Smith

A

a free exchange should be created because both countries are better for exchange

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11
Q

negative of Adam Smith

A

over-emphasised the material aspects of well being and ignored non-material aspects

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12
Q

reasons why karl
marx is right

A

-much less poverty
-helps explain conflict and change
-prevents exploitation

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13
Q

reasons why karl marx is wrong

A

-class struggle is not as important as marx suggests
-overlooks alternative ideas that might shape behaviour
-too much focus on class conflict, other issues affecting behaviour like gender, race and individuals are not given attention

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14
Q

functions of money

A

-a medium of exchange (between suppliers and customers)
-a measure of value (price tags)
-a store of value (weekly wages)
-a method of settling debts

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15
Q

total utility

A

the total satisfaction from a given level of consumption

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16
Q

marginal utility

A

the change in satisfaction from consuming an extra unit. standard economic theory believes in the idea of diminishing returns

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17
Q

shifts in demand curve

A

-trends
-interest rates
-change in price of substitute
-wealth
-change in price of complementary goods
-social+emotional factors
-advertising
-population

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18
Q

shifts in supply curve

A

-technology
-cost of production
-raw materials
-government
-taxes
-wages
-flood

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19
Q

excess supply

A

more supply than demand

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20
Q

excess demand

A

more demand than supply

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21
Q

derived demand

A

this is where the demand for one item is related to the demand for another item

22
Q

ped calculation

A

% change in quantity demanded / % change in price

23
Q

determinants of elasticity of demand

A

-time period
-number of substitutes
-the proportion of income taken up by the product
-luxury or necessity
-habit forming

24
Q

determinants of elasticity of supply

A

-4 factors of production (land,labour,capital,enterprise)
-time
-spare capacity
-spare stock and components

25
Q

Pes calculation

A

% change in quantity supplied / % change in price

26
Q

Yed

A

Income elasticity of demand. % change in quantity demanded / % change in income

27
Q

Normal good

A

Demand rises as income rises and vice versa

28
Q

Inferior good

A

Demand falls as income rises and vice versa

29
Q

Cross elasticity of demand

A

The responsiveness of demand of one good to changes in the price of a related good - either a substitute or a complement

30
Q

Price mechanism

A

Interaction of buyers and sellers in free markets, enables goods, services and recourses to be allocated by prices.

31
Q

The rationing function

A

Whenever resources are particularly scarce, demand exceeds supply and prices are driven up. The effect of such a price rise is to discourage demand and conserve recourses

32
Q

The signalling function

A

Price changes send contrasting messages to consumers and producers about whether to enter / leave a market

33
Q

The incentive function

A

Motivates a producer to follow a course of action or to change behaviour. Higher prices provide incentive to existing producers to supply more so they get more revenue and profit.

34
Q

Complete market failure

A

Occurs when the market simply doesn’t supply products

35
Q

Partial market failure

A

Occurs when market does actually function but produces either a wrong quantity of a product or at the wrong price

36
Q

Public goods

A

an example of market failure resulting from missing markets

37
Q

Non excludability

A

The benefits derived from pure public goods can’t be confined solely to those who have paid for it

38
Q

Non rival consumption

A

Consumption by one does not restrict consumption by another consumer

39
Q

Non rejectable

A

The collective supply of a public good for all means it can’t be rejected by people

40
Q

Free rider problem

A

Because public goods are non excludable it is difficult to charter people for benefitting from a good once it is provided

41
Q

Quasi public good

A

Semi non rival and semi non excludable

42
Q

Merit good

A

Those goods and services that the government believe people will under consume

43
Q

De merit goods

A

Thought to be bad for you. They are over consumed, bad for you, bad for negative externalities

44
Q

The principal agent

A

Arrangement in which one entity legally appoints another to act on its behalf

45
Q

The principal agent problem

A

Asymmetric information

46
Q

Negative externalities

A

A product which has a negative impact on the third party

47
Q

Positive externalities

A

A product which has a positive impact on a third party

48
Q

Regressive tax

A

Low income person is affected more than a high income tax

49
Q

London contesting charging

A

Paying to be able to drive through central London to reduce traffic in central London

50
Q

Asymmetric information

A

Producer and consumer don’t know the same info. Producer may have more detailed info than consumer

Economics (7 decks)

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