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capitalism > tiny 2 > Flashcards

tiny 2 Flashcards

1
Q

substitutes

A

g&s that can replace each other to satisfy the same/similar need

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2
Q

complements

A

g&s that tend to be used together to satisfy a particular want

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3
Q

competitive supply

A

compete for use of same resources
producing one implies decrease in other
supply

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4
Q

joint supply

A

produced in same production process

not possible to produce more of one without producing more of other

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5
Q

inferior g&s

A

g&s where demand falls as income increases

more affordable substitutes for more expensive g&s

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6
Q

normal/superior g&s

A

g&s where demand increases as income increases

luxury g&s not deemed a necessity for living

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7
Q

supply shocks

A

sudden and unpredictable events that affect supply

can be beneficial/adverse

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8
Q

price control

A

the setting of market P by gov so P are unable to adjust back to their problematic equilibrium level determined by D and S

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9
Q

unit tax

A

a specific amount of tax is imposed on each unit of a g&s

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10
Q

externality

A

consumption or production that gives rise to pos or neg effects on others whose interests are not taken into consideration

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11
Q

negative externality

A

action exerts negative effects known as external cost on third parties but no compensation is paid
divergence between private and social cost

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12
Q

positive externality

A

action exerts positive effects known as external benefits on third parties but no payment received
divergence between private and social benefit

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13
Q

private cost

A

cost borne by economic agents taking action

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14
Q

external cost

A

cost borne by other economic agents (non-decision makers)

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15
Q

social cost

A

cost borne by society as a whole

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16
Q

private good

A

rivalrous and excludable in consumption

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17
Q

impure public good

A

non-rivalrous and excludable in consumption

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18
Q

excludable

A

can prevent people from consuming the g&s once it has been produced
usually done by charging a price for the g&s

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19
Q

free-rider problem

A

once the g&s are produced, consumers who have not paid can still enjoy the benefits of public g&s

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20
Q

production possibility curve

A

show all max combo of g&s that can be produced by an econ in a given period of time when all resources are fully and efficiently utilised
ceteris paribus: state of tech is fixed
show potential output

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21
Q

scarcity

A

problem that arises when we want more than we have

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22
Q

opportunity cost

A

highest-valued option forgone

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23
Q

what to produce

A

choice of the types and quantities of g&s to produce

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24
Q

how to produce

A

choice of production methods

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25
Q

for whom to produce

A

who can enjoy how much of g&s

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26
Q

circular flow

A

visualise and understand how a nation’s overall econ works and how the flow of money goes

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27
Q

injections

A

money flows pumped into the econ

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28
Q

leakages

A

money flows leaked out of the econ

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29
Q

investment

A

the expenditure by firms on capital to produce more g&s

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30
Q

demand

A

various planned Q a consumer is willing and able to buy at different possible P in a period of time, ceteris paribus

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31
Q

quantity demanded

A

Q of a g&s a consumer is willing & able to buy at a particular P

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32
Q

law of demand

A

when P increases, Qd decreases, vice versa, ceteris paribus

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33
Q

supply

A

various planned quantities a producer is willing & able to produce & supply to market at different possible price in a period of time, ceteris paribus

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34
Q

quantity supplied

A

Q of a g&s a producer is willing & able to produce and supply at a particular P

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35
Q

law of supply

A

when P increases, Qs increases, vice versa, ceteris paribus

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36
Q

market equilibrium

A

no tendency to change
Pe: Qs = Qd
Qe: Q at Pe

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37
Q

quantity transacted

A

actual Q bought & sold

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38
Q

price mechanism

A

the process by which P increase or decrease as a result of changes in D and S
coordinates consumption and production decisions as an invisible hand

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39
Q

shortage

A

excess D

Qd&raquo_space;> Qs

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40
Q

surplus

A

excess S

Qd «< Qs

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41
Q

market

A

where producers and consumers take place to exchange g&s

42
Q

competitive market

A

a market with many individual and small sellers and buyers
no one in the market have the power to influence P of g&s
P affected by D and S

43
Q

marginal benefit

A

extra benefit from consuming additional unit of good

downward-sloping bc consumers are willing to pay less for each additional unit

44
Q

consumer surplus

A

pos diff between maximum amount willing to pay and amount actually paid

45
Q

marginal cost

A

firms’ extra cost of producing additional unit of g&s

upward-sloping because each unit more costly than the last

46
Q

producer surplus

A

positive difference between amount actually received and minimum amount willing to accept

47
Q

social surplus

A

CS + PS

48
Q

allocative efficiency

A

achieved when market allocates resources so no one can be better off without making someone else worse off
MB = MC

49
Q

welfare loss

A

loss of SS in society when resources are not allocated efficiently

50
Q

price elasticity of demand

A

measures the responsiveness of Qd to a change in its P

% change in Qd/% change in P

51
Q

price elasticity of supply

A

measures the responsiveness of Qs to a change in its P

% change in Qs/% change in P

52
Q

indirect taxes

A

taxes on spending on g&s paid partly & indirectly by consumers but paid to gov by producers
suppliers can shift tax burden to consumers by ↑ P

53
Q

free market

A

P of g&s freely determined by D and S

54
Q

government intervention

A

any action carried out by gov that affects market econ with the objective of impacting consumption and production decisions

55
Q

price ceiling

A

legal maximum price set by the gov below the equilibrium price that producers can charge on a g&s

56
Q

price floor

A

legal minimum price set by the government above the equilibrium price that producers should charge on a g&s

57
Q

subsidy

A

financial assistance from the government

58
Q

socially-optimum outcome

A

no externalities
MPB = MPC and MSB = MSC
no difference between benefits to consumers and to society and costs to producers and to society
allocative efficiency achieved

59
Q

market failure

A

failure of the market to allocate resources efficiently

60
Q

demerit good

A

g&s considered to be undesirable to consumers

over-provided by free market

61
Q

negative externalities of consumption

A

external cost created by consumers in consumption process of g&s that result in negative effect on third parties

62
Q

merit good

A

g&s considered to be desirable by consumers

under-provided by free market

63
Q

positive externalities of consumption

A

external benefit created by consumers in consumption process of g&s that result in positive effect on third parties

64
Q

marginal private cost

A

cost to producers of producing 1 more unit of g&s

65
Q

marginal social cost

A

cost to society of producing 1 more unit of g&s

66
Q

marginal private benefit

A

benefit to consumers from consuming 1 more unit of g&s

67
Q

marginal social benefit

A

benefit to society from consuming 1 more unit of g&s

68
Q

negative externalities of production

A

external cost created by producers in production process

69
Q

positive externalities of production

A

external benefit created by producers in production process

70
Q

carbon tax

A

tax per unit of carbon emissions

71
Q

tradable permits

A

policy involving permits to pollute issued to firms by the government

72
Q

government regulation

A

policy implemented by the government to limit consumption or production activities

73
Q

education

A

used to persuade and inform consumers and change their consumption patterns by raising awareness (through advertising)

74
Q

common access resources

A

resources that unowned by anyone

available for anyone to use without payment

75
Q

sustainability

A

needs of the present are met without decreasing the ability of future generations to meet their own needs

76
Q

rivalrous

A

one’s consumption of g&s reduce amount available for others

77
Q

non-excludable

A

not possible to exclude people from using resource

used abundantly without restriction → resources overused, degraded and depleted

78
Q

tragedy of commons

A

occurs in shared-resource system where individual users act independently according to own self-interest

79
Q

public good

A

non-rivalrous & non-excludable in consumption

80
Q

allocative inefficiency

A

MB > MC: underproduction
MB < MC: overproduction
welfare loss exist

81
Q

ceteris paribus

A

keeping all other factors equal

82
Q

consumption

A

spending by households on consumer g&s over a period of time

83
Q

human capital

A

skills, abilities, knowledge and good levels of health of labour

84
Q

capital

A

the FoP that comes from investment in physical and human capital

85
Q

entrepreneurship

A

the FoP involving organising and risk-taking

recognising the possibility of gain from employing a combination of other FoPs in a specific way

86
Q

factors of production

A

the 4 resources that allow an economy to produce its output: land, labour, capital and entrepreneurship

87
Q

firms

A

the productive units in the econ that turn FoP into g&s

88
Q

income elasticity of demand

A

a measure of the responsiveness of the D for a g&s to a change in income

89
Q

labour

A

the human FoP

the physical and mental contribution of the existing work force to production

90
Q

land

A

the physical FoP

consists of natural resources, some of which are renewable and some of which are non-renewable

91
Q

perfectly elastic demand

A

an increase in the P of a g&s leads to a fall in the Qd of the g&s to zero
infinity

92
Q

perfectly elastic supply

A

a fall in the P of a g&s leads to a fall in the Qs of the g&s to zero
infinity

93
Q

perfectly inelastic demand

A

a change in the P of a g&s leads to no change in the Qd of the g&s
0

94
Q

perfectly inelastic supply

A

a change in the P of a g&s leads to no change in the Qs of the g&s
0

95
Q

primary commodities

A

raw materials that are produced in the primary sector

96
Q

primary sector

A

extracts or harvests products directly from natural resources in order to produce raw materials or food

97
Q

total revenue

A

the aggregate revenue gained by a firm from the sale of a particular Q of output
P x Qt

98
Q

unitary elastic demand

A

a change in the P of a g&s leads to an equal and opposite proportional change in the Qd of the g&s
1

99
Q

unitary elastic supply

A

a change in the P of a g&s leads to an equal proportional change in the Qs of the g&s
1

100
Q

income

A

flow of earnings from using labour to produce g&s

wages and salaries are the factor reward to labour

capitalism (4 decks)

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