Theme 1 Economics Flashcards
Market
A set of arrangements that allows transactions to take place
Adverse selection
A situation in which a person at risk os more likely to take out insurance
Allocative insurance
Achieved when society is producing appropriate amounts to fit consumer preferences
Asymmetric information
When sine participants in a market have better information about the market than ithers
Command economy
Sm economy in which decisions on resource allocation are guided by the state
Comparative static analytics
Examining the effect on equilibrium after an external effect
Competitive market
A market where an individual cannot influence the price bascule the firms are in competition with other firms
Consumer surplus
The value that the consumer gains when consuming a good that is over the price paid
Consumption externality
An externality that affects the consumption side of market which may be positive or negative
XED
a measure if sensitivity demanded of a good or service to a change of price of another good
Diminishing marginal utility
Describes the situation where an individual gains less additional utility from consuming a product the more of it is consumed
Free rider problem
When an individual cannot be excluded from consuming a good and thus has no incentive to pay for its provision
incidence of tax
The way in which the burden of paying a sales tax is divided between buyers and sellers
Internalizing an externality
An attempt to deal with an externality by bringing an external cost or benefit into the price system
Marginal analysis
An approach to economic decision based on considering the additional marginal benefits and costs of a change in behavior
Marginal cost
The cost of producing an additional unit of output
Marginal social benefit
The additional benefit that society gains from consuming an extra unit of goof
Marginal social cost
The cost to society of producing an extra unit of good
Market economy
An economy in which market force are allowed to guide allocation of resources
Market failures
A situation in which the free market mechanism does not reach optimal allocation of resources where there is divergence between social benefit and cist
Mixed economy
An economy which resources are allocated by produce signals and intervention by the state
Moral hazard
Situation which a person who takes out insurance is more prone to ridk
NMBY not in my backyard
Syndrome which people are happy to support construction of unsocial facility as long as it’d not in their own area
Producer surplus
Difference between the price received by the firms for a good or service and the price at which they would have been prepared to supply that good or service
Production externality
An externality that affects the production side of a market which may be positive or negative
Social cost
Probate cost plus external cost
Sustainable development
Development which meets needs of the present without compromising the ability of future generations to meet their own needs.
