Unit 1 definitions Flashcards
Allocative efficiency
Occurs when the value that consumers place in a good or service equals the cost of the resources used in production
Ad valorem tax
An indirect tax based on a percentage of the sales price of the good or service
Asymmetric information
When one person knows more than somebody else in the market
Average cost
Total cost/number of units of the good produced
Average fixed cost
TFC/output
Barriers to entry
Factors making in expensive/difficult for a new firm to enter a market
Basic problem
There are infinite wants but finite resources
Buffer stock
A scheme which seeks to stabilise the market price of agricultural goods by buying up supplies when there is a good harvest and selling the stocks when supplies are low (bad harvest)
Capacity utilisation
The extent to which a business is making full use of existing FOPs
Capital/producer goods
Plants, machinery, equipment
Cartel
Formal agreement among firms -illegal in the UK and EU
Ceteris Paribus
All other influencing factors are held constant
Command economy
Economic system where resources are allocated by the government
Capitalist economy
An economy which uses market-determined prices to guide our choices about the production and distribution of goods. Main role of state is to maintain law and order
Complements
2 complements are said to be in joint demand
