Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Economics > Theme 1 An Introduction to Markets and Market Failure > Flashcards

Theme 1 An Introduction to Markets and Market Failure Flashcards

1
Q

Ad valorem tax

A

An indirect tax imposed on a good where the value of the tax is dependent on the value of the good

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

Asymmetric information

A

Where one party has more information than the other, leading to market failure

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

Capital

A

One of the four factors of production; goods which can be used in the production process

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

Capital goods

A

Goods produced in order to aid production of consumer goods in the future

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

Ceteris paribus

A

All other things remaining the same

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

Command economy

A

All factors of production are allocated by the state, so they decide what, how and for whom to produce goods

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

Complementary goods

A

Negative XED; if good B becomes more expensive, demand for good A falls

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

Consumer goods

A

Goods bought and demanded by households and individuals

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

Consumer surplus

A

The difference between the price the consumer is willing to pay and the price they actually pay

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

Cross elasticity of demand (XED)

A

The responsiveness of demand for one good to a change in the price of another good

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

Demand

A

The quantity of a good/service that consumers are able and willing to buy at a given price at a given moment in time

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

Diminishing marginal utility

A

The extra benefit gained from consumption of a good generally declines as extra units are consumed; explains why the demand curve is downward sloping

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

Division of labour

A

When labour becomes specialised during the production process as a result of the manufacturing process being split into smaller, individual tasks

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

Economic problem

A

The problem of scarcity: wants are unlimited but resources are finite so choices have to be made

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

Efficiency

A

When resources are allocated optimally, so every consumer benefits and waste is minimised

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

Enterprise

A

One of the four factors of production; the willingness and ability to take risks and combine the three other factors of production

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

Equilibrium price/quantity

A

Where demand equals supply so there are no more market forces bringing about change to price or quantity sold

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

Excess demand

A

When the price is set too low so demand is greater than supply

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

Excess supply

A

When the price is set too high so supply is greater than demand

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

Externalities

A

The cost or benefit a third party receives from an economic transaction outside of the market mechanism

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

External cost/benefit

A

The cost/benefit to a third party not involved in the economic activity; the difference between social cost/benefit and private cost/benefit

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

Free market

A

An economy where the market mechanism allocates resources so consumers and producers make decisions about what is produced, how to produce it and for whom

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

Free rider principle

A

People who do not pay for a public good still receive benefits from it so the private sector will under-provide the good as they cannot make a profit

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

Government failure

A

When government intervention leads to net welfare loss in society

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Habitual behaviour

A

A cause of irrational behaviour; when consumers are in the habit of making certain decisions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Incidence of tax

A

The tax burden on the taxpayer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Income elasticity of demand (YED)

A

The responsiveness of demand to a change in income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Indirect tax

A

Taxes on expenditure which increase production costs and lead to a fall in supply

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Inferior goods

A

YED<0; goods which see a fall in demand as income increases

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Information gaps

A

When an economic agent lacks the information needed to make a rational, informed decision

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Labour

A

One of the four factors of production; human capital

32
Q

Land

A

One of the four factors of production; natural resources such as oil, coal, wheat, physical space

33
Q

Luxury goods

A

YED>1; an increase in incomes causes an even bigger increase in demand

34
Q

Market failure

A

When the free market fails to allocate resources to the best interest of society, so there is an inefficient allocation of scarce resources

35
Q

Market forces

A

Forces in free markets which act to reduce prices when there is excess supply and increase them when there is excess demand

36
Q

Minimum price

A

A floor price which a firm cannot charge below

37
Q

Mixed economy

A

Both the free market mechanism and the government allocate resources

38
Q

Model

A

A hypothesis which can be proven or tested by evidence; it tends to be mathematical whilst a theory is in words

39
Q

Negative externalities of production

A

Where the social costs of producing a good are greater than the private costs of producing the good

40
Q

Non-excludability

A

A characteristic of public goods; someone cannot be prevented from using the good

41
Q

Non-renewable resources

A

Resources which cannot be readily replenished or replaced at a level equal to consumption; the stock level decreases over time as they are consumed

42
Q

Non-rivalry

A

A characteristic of public goods; on person’s use of the good does not prevent someone else frm using it

43
Q

Normal goods

A

YED>0; demand increases as income increases

44
Q

Normative statements

A

Subjective statements based on value judgements and opinions; cannot be proven or disproven

45
Q

Opportunity cost

A

The value of the next best alternative forgone

46
Q

Perfectly price elastic good

A

PED/PES=Infinity; quantity demanded/supplied falls to 0 when price changes

47
Q

Perfectly price inelastic good

A

PED/PED=0; quantity demanded/supplied does not change when price changes

48
Q

Positive externalities of consumption

A

Where the social benefits of consuming a good are larger than the private benefits of consuming that good

49
Q

Positive statements

A

Objective statements which can be tested with factual evidence to be proven or disproven

50
Q

Possibility production frontier (PPF)

A

Depicts the maximum productive potential of an economy when all resources are fully and efficiently employed; using a combination of two goods or services

51
Q

Price elasticity of demand

A

The responsiveness of demand to a change in price

52
Q

Price elasticity of supply

A

The responsiveness of supply to a change in price

53
Q

Price mechanism

A

The system of allocation based on the free market movement of prices, determined by the demand and supply curves

54
Q

Private cost/benefit

A

The cost/benefit to the individual participating in the economic activity

55
Q

Private goods

A

Goods that are rivalry, excludable, rejectable and have a marginal cost to the consumers who chooses to use it

56
Q

Producer surplus

A

The difference between the price the producer is willing to charge and the price they actually charge

57
Q

Public good

A

Goods that are non-excludable, non-rivalry, non-rejectable and have zero marginal costs

58
Q

Rationality

A

Decision-making that leads to economic agents maximising their utility

59
Q

Regulation

A

Laws to address market failure and promote competition between firms

60
Q

Relatively price elastic good

A

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

61
Q

Relatively price inelastic good

A

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

62
Q

Renewable resources

A

Resources which can be replenished, so the stock of resources can be maintained over a period of time

63
Q

Scarcity

A

The shortage of resources in relation to the quantity of human wants

64
Q

Social cost/benefit

A

The cost/benefit to society as a whole due to the economic activity

65
Q

Social optimum position

A

Where social costs equal social benefits; the amount which should be produced/consumed in order to maximise social welfare

66
Q

Social science

A

The study of societies and human behaviour

67
Q

Specialisation

A

The production of a limited range of goods by a company/country/individual so they aren’t self-sufficient and have to trade with others

68
Q

Specific tax

A

A tax imposed on a good where the value of the tax is dependent on the quantity that is bought

69
Q

State provision

A

When the government provides public goods or merit goods which are underprovided in the free market

70
Q

Subsidy

A

Government payments to a producer to lower their costs of production and encourage them to produce more

71
Q

Substitutes

A

Positive XED; if good B becomes more expensive, demand for good A rises

72
Q

Supply

A

The ability and willingness to provide a particular good/service at a given price at a given moment in time

73
Q

Symmetric information

A

Where buyers and sellers both have access to the same information

74
Q

Trade pollution permits

A

Licences which allow businesses to pollute up to a certain amount. The government controls the number of licences and so can control the amount of pollution. Businesses are allowed to sell and buy the permits which means there may be incentive to reduce the amount they pollute

75
Q

Unitary price elastic good

A

When PED/PES=1; a change in price leads to a change in output by the same proportion

76
Q

Utility

A

The satisfaction derived from consuming a good

77
Q

Weakness at computation

A

A cause of irrational behaviour; when consumers are bad at making calculations, estimating probabilities and working out future benefits/costs

Economics (4 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions