Theme 1 key words Flashcards
What is ad valorem tax?
Sales tax that is set at a % of the price
What is adverse selection?
Situation in which a person at risk is more likely to take out insurance
What is asymmetric information?
Situation in which some participants in a market have a better information about market conditions than others
What are capital goods?
goods used as part of the production process eg machinery or factory buildings
What is cartel?
An agreement between firms in a market on price and output with the intention of maximising their joint profits
What is ceteris paribus?
Latin phrase meaning ‘other things being equal’ used in economics when we focus on changes in one variable while holding other influences constant
What is a command economy?
An economy in which decisions on resource allocation are guided by the state
What is a competitive market?
A market in which individual firms cannot influence the price of the good or service they are selling because of competition from other firms
What are complements?
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
What are consumer goods?
Goods produced for present use (consumption)
What is a consumer surplus?
Value that consumers gain from consuming a good or service over and above the price paid
What is a consumption externality?
An externality that affects the consumption side of the market may be positive or negative
What is cross elasticity of demand (XED)?
A measure of the sensitivity of quantity demanded of a good or service to a change in the price of some other good or service
What is demand?
Quantity of a good or service that consumers are willing and able to buy at any given price in a given period of time
What is a demand curve?
Graph showing how much of a good will be demanded by consumers at any given price
