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Y1 ECON > theme 1 key words > Flashcards

theme 1 key words 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

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2
Q

asymmetric information

A

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

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3
Q

capital

A

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

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4
Q

capital goods

A

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

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5
Q

ceteris paribus

A

all other things remaining the same

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6
Q

command economy

A

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

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7
Q

complementary goods

A

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

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8
Q

consumer goods

A

goods bought and demanded by households and individuals

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9
Q

consumer surplus

A

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

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10
Q

cross elasticity of demand (XED)

A

the responsiveness of demand for one good (A) to a change in price of another good (B)

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11
Q

demand

A

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

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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

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13
Q

division of labour

A

when labour becomes specialised during the production process so do a specific task in cooperation with other workers

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14
Q

economic problem

A

the problem of scarcity; wants are unlimited but resources are finite so choices have to be made

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15
Q

efficiency

A

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

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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

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17
Q

equilibrium
price/quantity

A

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

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18
Q

excess demand

A

when price is set too low so demand is greater than supply

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19
Q

excess supply

A

when price is set too high so supply is greater than demand

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20
Q

externalities

A

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

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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

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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 and for whom

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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

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24
Q

government failure

A

when government intervention leads to a net welfare loss in society

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25
Q

habitual behaviour

A

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

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26
Q

incidence of tax

A

the tax burden on the taxpayer

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27
Q

income elasticity of
demand (YED)

A

the responsiveness of demand to a change in income

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28
Q

indirect tax

A

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

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29
Q

inferior goods

A

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

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30
Q

information gap

A

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

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31
Q

information provision

A

when the government intervenes to provide information to correct
market failure

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32
Q

labour

A

one of the four factors of production; human capital

33
Q

land

A

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

34
Q

luxury goods

A

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

35
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

36
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

37
Q

maximum price

A

a ceiling price which a firm cannot charge above

38
Q

minimum price

A

a floor price which a firm cannot charge below

39
Q

mixed economy

A

both the free market mechanism and the government allocate resources

40
Q

model

A

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

41
Q

negative externalities of
production

A

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

42
Q

non-excludable

A

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

43
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

44
Q

non-rivalry

A

a characteristic of public goods; one person’s use of the good does not prevent someone else from using it

45
Q

normal goods

A

YED>0; demand increases as income increases

46
Q

normative statements

A

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

47
Q

opportunity cost

A

the value of the next best alternative forgone

48
Q

perfectly price elastic
good

A

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

49
Q

perfectly price inelastic
good

A

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

50
Q

positive externalities of
consumption

A

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

51
Q

positive statement

A

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

52
Q

possibility production
frontier (PPF)

A

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

53
Q

price elasticity of
demand (PED)

A

the responsiveness of demand to a change in price

54
Q

price elasticity of
supply (PES)

A

the responsive of supply to a change in price

55
Q

price mechanism

A

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

56
Q

private cost/benefit

A

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

57
Q

private goods

A

goods that are rivalry and excludable

58
Q

producer surplus

A

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

59
Q

public goods

A

goods that are non-excludable and non-rivalry

60
Q

rationality

A

decision-making that leads to economic agents maximising their utility

61
Q

regulation

A

laws to address market failure and promote competition between firms

62
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

63
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

64
Q

renewable resources

A

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

65
Q

scarcity

A

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

66
Q

social cost/benefit

A

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

67
Q

social optimum position

A

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

68
Q

social science

A

the study of societies and human behaviour

69
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

70
Q

specific tax

A

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

71
Q

state provision of goods

A

through taxation, the government provides public goods or merit goods which are underprovided in the free market

72
Q

subsidy

A

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

73
Q

substitutes

A

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

74
Q

supply

A

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

75
Q

symmetric information

A

where buyers and sellers both have access to the same information

76
Q

trade pollution permits

A
  • licenses which allow businesses to pollute up to a certain amount

-the government controls the number of licenses 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

77
Q

unitary price elastic good

A

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

78
Q

utility

A

the satisfaction derived from consuming a good

79
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

Y1 ECON (13 decks)

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