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Economics 1,2 > Unit 1, AOS 2 > Flashcards

Unit 1, AOS 2 Flashcards

1
Q

What is a market

A

= a place / situation where buyers + sellers of g/s come together 2 exchange a g/s

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2
Q

What is a price

A

= rate of exchange of a g/s being sold

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3
Q

What is a product

A

=a physical, tangible good

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4
Q

What is a service

A

= an intangible product like a bus ride

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5
Q

What is the price mechanism

A

= describes how force of d+s influence price of g/s which then coordinates the way productive resources are allocated in the economy

-> model presumes market is highly competitive

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6
Q

What is perfect competition

A
  • where bus. R price takers
    -products are homogenous
  • easy entry +exit

->highest lvl of market competition

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7
Q

What are the 3 economic questions

A
  • how to produce
  • what + how much 2 produce
  • for whom 2 produce
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8
Q

What is demand

A

= ability and willingness of c’er 2 purchase g/s

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9
Q

What is the law of demand

A
  • prices decrease t/f qty demanded inc
  • prices inc t/f qty demanded decrease
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10
Q

How is the law of demand related 2 c’er behaviour

A

-c’er aim 2 max utility t/f buy products @ lower price
- “income effect” = if prices inc, c’er x able 2 afford same qty
- “substitution effect” = if price inc, c’er tend 2 make informed decisions t/f turn 2 dif/rival product

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11
Q

What does the demand curve represent

A

= show relationship b/n various possible prices + qty that c’er in a market would be willing and able 2 buy

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12
Q

Describe the law of demand in relation to graphs

A
  • price inc = contraction in qty demanded = upward movement
  • price decrease = expansion in qty = demanded = downward movement
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13
Q

Distinguish the difference between movement along and shift of a demand curve

A
  • P.O.D = cause of change
  • Movement = due 2 change in g/s price
  • Shift = when one of the other factors of demand ( x price ) have changed -> inc/decrease in qty demanded @ any given price
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14
Q

Types of non-price factors which influence demand

A
  • Disposable income
  • Changes in population size
  • Preferences + tastes
  • Interest rates
  • Price of substitute
  • Price of compliment
  • Lvl of c’er sentiment (confidence)
  • Change in seasons
  • Government policies
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15
Q

How does disposable income change and what does it affect

A

-> affects c’er purchasing power
changes through :
-> tax rates changes
-> inc pay rates
-> inc min wage

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16
Q

What is the non price factor “change in population size” and how does it change

A

= size of number of individuals in an economy
-> birth rate inc/dec
-> immigration inc/dec

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17
Q

What is the non price factor “preferences + tastes” and how does it change

A

= choice of individuals which change over time b/c influence of marketing + promotion of products by individuals

-> new trendy product
-> better promotion of product
-> new discovery re. how certain products are beneficial

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18
Q

What is the non price factor “interest rates”

A

= cost of borrowing / incentive to save measured by lvl of interest rates attached 2 various forms of credit, e.g credit cards / home loan rates

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19
Q

What is the non price factor “ price of a substitute”

A

= products which are somewhat homogenous or can be replaced by eachother

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20
Q

What is the non price factor “price of compliment”

A

= products typically consumed together

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21
Q

What is the non price factor “consumer sentiment”

A

= c’er perceptions re. future income levels / job prospects

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22
Q

What is the non price factor “onset of the season”
(climatic conditions)

A

-> seasons important b/c factor in determining demand 4 certain products
e.g heaters inc popular in winter
e.g ice cream inc popular in summer

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23
Q

What is the non price factor “government intervention / policies”

A

= influence p’ers + affect demand in various ways
e.g subsidies, taxes, rebates, laws

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24
Q

What is supply

A

= willingness + ability of p’ers 2 produce + sell g/s

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25
What is the law of supply
= price of product inc. -> qty supplied decrease and inverse
26
What is an expansion along the supply curve
= movement upwards on curve that happens when there is an inc in price hence qty supplied inc
27
What is a contraction along the supply curve
= movement downwards on curve that happens when there is a decrease in price hence qty supplied dec
28
What are non price factors of supply
- Cost of production - Technological changes ( can make g/s cheaper 2 produce) - Productivity growth (assist through edu + training) - Climatic conditions (natural disasters) - Gov.t regulations
29
What is productivity growth
-> productivity = max outputs from given level of inputs
30
What is equilibrium price
= refers 2 price which -> total Qty demanded = total Qty supplied with x shortage or surplus @ this price + market is in state of rest
31
What is equilibrium quantity
= number of g/s sold in a market when price is @ its equilibrium level
32
What are disequilibriums in markets
- Shortage = demand > supply - Surplus demand < supply
33
How to answer shift in equilibrium price of d/s curves qs
1) describe factor 2) impact D or S 3) inc or dec 4) temporary shortage or surplus 5) puts inc or dec pressure on prices 6) new equilibrium
34
What does price mechanism refer to
-> describes how forces of demand + supply influence (relative) prices of g/s which then coordinates the way productive resources are allocated in the economy
35
What are relative prices
= prices of a g/s relative 2 price of another g/s
36
What is market power
= ability of any particular business 2 control or manipulate prices / quantities in a market
37
What are determinants of market structures
- Number of buyers + sellers - Types of products - Ease of entry / exit - Degree 2 which buyers + sellers possess info re. products 4 sale
38
What are the 4 market structures
1) perfect/pure competition 2) monopolistic competition 3) oligopoly 4) Monopoly
39
What is a perfect competitive market (determinants)
-> inc buyers + sellers -> perfectly homogenous products -> x barriers 2 entry + exit -> buyers + sellers possess perfect info Sellers are price takers
40
What is the impact of perfect competitive markets on price and efficiency of resource allocation
Low prices High efficiency of allocation b/c inc productivity
41
What is monopolistic competition (determinants)
-> inc buyers + sellers -> x barriers 2 entry + exit -> perfect info possessed -> lacks product homogeneity due 2 branding Sellers are price takers
42
What is the impact of monopolistic competitive markets on price and efficiency of resource allocation
less low h/r varies Less efficient than Per. Comp h/r still high
43
What is an oligopoly market (determinants)
-> low number of sellers (2-3) -> high barriers 2 entry + exit -> imperfect info possessed by suppliers -> lacks homogeneity b/c branding sellers are price makers
44
What is the impact of an oligopoly on price and efficiency in resource allocation
High prices Low efficiency overall h/r still some 2 make profit
45
What is a monopoly market (determinants)
-> low sellers (usually 1 or 1 with maj market share) -> high barriers 2 entry + exit -> homogeneity is mostly irrelevant -> bus x possess perfect info sellers are price makers
46
What is the impact of a monopoly on prices and efficiency in resource allocation
High prices Low efficiency
47
What is efficient allocation of resources
-> occurs when economy max outputs from inputs t/f max nations L.S
48
What are living standards
= total welfare of all people in a country like Australia, made up of both material (access 2 g/s) + non material (quality of life) factors
49
What is market failure
= unregulated market x able 2 allocate resources efficiently or allocation -> L.S x maximised. It will -> over/under-allocation of resources in production of g/s
50
What are public goods
= g/s available 4 all ppl 2 use, gain benefit from / enjoy which are socially desirable + important 2 all e.g transport, health + education. They're costly t/f x one supplies them -> x market price They're non excludable and non depletable
51
What does non-excludable refers 2
= x able 2 exclude x-payers from enjoying benefits that the g/s provides -> free rider problem
52
What does non-depletable refers 2
= 1 person's consumption x diminish ability of others' 2 enjoy the same consumption, so all benefit equally
53
How are public goods inefficient
= under allocation of resource
54
What is a free rider
= an economic agent who receives the benefit from a public good h/r x pay 4 it
55
What are government interventions in relation 2 public goods
-> 2 address under allocation of resources... - gov.t subsidies in form of payment 2 private suppliers 2 cover costs incurred in provision of public goods - Direct gov.t provision = gov.t provide g/s
56
What is an externality
= results when the well-being of a 3rd party x involved in a transaction is affected -> +ve or -ve
57
What is a positive externality
= occurs when a 3rd party receives benefit from production / consumption of a g/s.
58
Examples of positive externalities in production and consumption
Production - RnD by bus - Beekeeper assisting nearby food p'cers Consumption - Vaccination - Education
59
What is the role and effect of Government interaction +ve externalities
= ensure consumption + production of positive externalities occur 1) Subsidies - Solar panels 2) Direct Provision - Health + Education - RnD
60
What are negative externalities
= occurs when cost is imposed on a 3rd party x involved in the transaction, from the production / consumption of a product
61
Examples of negative externalities in production and consumption
Production - pollution (noise/air) Consumption - Smoking
62
What market failure do externalities result in
+ve externalities -> under allocation of resources -ve externality -> over allocation of resources
63
What is the role and effect of Government intervention
= ensure consumption + production of -ve externalities x occur 1) Indirect Taxes - Excise tax 2) Subsidies - 2 bus + households that generate electricity using solar panels 3) Government regulations 4) Government advertising - Influence taste + preferences by making consumers aware of negative aspects

Economics 1,2 (7 decks)

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