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A Level Economics > Unit 1 Key Definitions > Flashcards

Unit 1 Key Definitions Flashcards

1
Q

Ad valorem tax

A

a percentage expenditure tax such as VAT

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2
Q

Average cost

A

the cost per unit of output; also called unit cost

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3
Q

unit cost

A

the cost per unit of output; also called average cost

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4
Q

Buffer stock

A

a store of an agricultural good or primary product which is added to in the event of a surplus and released onto the market in the event of a shortage

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5
Q

Competitive market

A

a market in which the large number of buyers and sellers possess good market information and easily enter or leave the market

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6
Q

Condition of demand

A

a determinant of demand, other than the good’s own price, that fixes the position of the demand curve

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7
Q

Condition of supply

A

a determinant of supply, other than the good’s own price, that fixes the position of the supply curve

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8
Q

Cross-elasticity of demand

A

the proportionate change in demand for a good following an initial proportionate change in the price of another good

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9
Q

Decrease in demand

A

a leftward shift of the demand curve.

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10
Q

Decrease in supply

A

a leftward shift of the supply curve

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11
Q

Demand

A

the quantity of a good or service that consumers are able and willing to buy at given prices in a given period of time. For economists, demand is always effective demand

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12
Q

Demerit good

A

a good, such as tobacco, for which the social costs of consumption exceed the private costs

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13
Q

Diseconomy of scale

A

rising average or unit cost as a firm increases its size or scale

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14
Q

Division of labour

A

this concept goes hand in hand with specialisation. Different workers perform different tasks in the course of producing a good or service. Different workers may also produce different goods or services

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15
Q

Economy of scale

A

falling average or unit costs as a firm increases its size or scale

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16
Q

Effective demand

A

the desire of a good or service backed by an ability to pay

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17
Q

Elasticity

A

the proportionate responsiveness of a second variable to an initial proportionate change in the first variable

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18
Q

Emissions trading

A

emissions trading systems allow policy-makers to set a pollution target, and then issue tradable permits corresponding to that amount. Companies that wish to pollute must hold permits equal to their emissions

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19
Q

Equilibrium

A

a state of rest or balance between opposing forces.

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20
Q

Equity

A

fairness or justness

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21
Q

Excess demand

A

when consumers wish to buy more than firms wish to sell, with the price below the equilibrium price

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22
Q

Excess supply

A

when firms wish to sell more than consumers wish to buy, with the price above the equilibrium price

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23
Q

Exchange

A

specialisation and the division of labour mean that goods and services must be exchanged for each other. Money and the use of barter are mediums of exchange

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24
Q

Expenditure tax

A

a tax levied by the government on spending by consumers. The firms selling the good pay tax to the government, but consumers indirectly pay via the resulting price rise

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25
Q

Externality

A

a public good, in the case of an external benefit, or a public bad, in the case of an external cost, that is “dumped” on third parties outside the market

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26
Q

Finite resource

A

a resource, such as oil, which is scarce and runs out as it is used

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27
Q

Fiscal policy

A

a government policy that uses the fiscal instruments of taxation, government spending and the government’s budgetary position to achieve particular policy objectives

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28
Q

Free-rider:

A

somebody who benefits from a good or service without paying for it

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29
Q

Good

A

a good yields utility, unlike a “bad” which yields disutility

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30
Q

Government failure

A

occurs when government intervention in an economy is ineffective, wasteful or damaging

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31
Q

Government transfers

A

a payment of money from a government to an individual for which no good or service is given in return

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32
Q

Immobility of labour

A

the inability of labour to move from one job to another, either for occupational reasons (e.g. the need for training) or for geographical reasons (e.g. the cost of moving to another part of the country.)

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33
Q

Incentive function

A

prices create incentives for consumers and firms to behave in certain ways

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34
Q

Income

A

a flow of money received (e.g. as a wage) from supplying labour

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35
Q

Income elasticity of demand

A

the proportionate change in demand for a good following an initial proportionate change in consumers’ income

36
Q

Increase in demand

A

a rightward shift of the demand curve

37
Q

Increase in supply

A

a rightward shift of the supply curve

38
Q

Inferior good

A

a good for which demand decreases as income rises

39
Q

Information problem

A

this occurs when people make wrong decisions because they don’t possess or ignore relevant information. Very often they are myopic (short-sighted) about the future

40
Q

Intervention price

A

a price at which a buffer stock agency starts to buy or sell a good, thereby adding to or depleting the buffer stock

41
Q

Margin

A

refers to the last unit undertaken of an activity

42
Q

Marginal benefit

A

the benefit resulting from the last unit of a good

43
Q

Marginal cost

A

the cost of the last unit of a good

44
Q

Market demand

A

the quantity of a good or service that all the consumers in the market are willing and able to buy

45
Q

Market disequilibrium

A

when the market failures to clear. The market plans of consumers and firms are inconsistent with each other

46
Q

Market equilibrium

A

when planned demand equals planned supply in the market

47
Q

Market failure

A

a market completely failing to provide a good or service, or providing the wrong quantity (i.e. a quantity that leads to a misallocation of resources.)

48
Q

Market supply

A

the quantity of a good or service that all the firms in a market are willing to sell

49
Q

Merit good

A

a good, such a healthcare, for which the social benefits of consumption exceed the private benefits.

50
Q

Monopoly

A

a market dominated by one firm

51
Q

Nationalisation

A

the state taking over firms or industries previously in the private sector

52
Q

Natural monopoly

A

a market in which there is only room for one firm benefiting to the full from economies of scale

53
Q

Normal good

A

a good for which demand increases as income rises

54
Q

Normative statement

A

a statement of opinion based on a value judgement

55
Q

Positive statement

A

a statement of fact, or one that can be scientifically tested

56
Q

Price ceiling

A

a price above which it is illegal to trade. Price ceilings, or maximum legal prices, can distort markets by creating excess demand

57
Q

Price elasticity of demand

A

the proportionate change in demand for a good following an initial proportionate change in the good’s own price

58
Q

Price elasticity of supply

A

the proportionate change in supply of a good following an initial proportionate change in the good’s own price

59
Q

Price floor

A

a price below which it is illegal to trade. Price floors, or minimum legal prices, can distort markets by creating excess supply

60
Q

Private benefit maximisation

A

occurs when MPC = MPB

61
Q

Private good

A

a good, such as an orange, that is excludable and rival

62
Q

Privatisation

A

the state selling nationalised firms or industries to the private sector

63
Q

Production

A

converts inputs or factor services into outputs of goods

64
Q

Productive efficiency

A

occurs when a firms minimises average costs and produces at the lowest point on its average cost curve

65
Q

Produce efficiency (for the whole economy)

A

the whole economy is productively efficient when producing on its production possibility frontier

66
Q

Productivity

A

output per unit of input (e.g. labour productivity is output per worker.)

67
Q

Profit

A

the difference between total sales revenue and total costs of production

68
Q

Progressive taxation

A

a progressive tax is where the tax rate increases as income rises. As a result, the rich pay a larger proportion of their income in tax than the poor

69
Q

Public good

A

a good, such as a radio programme, that is non-excludable and non-rival

70
Q

Pure monopoly

A

one firm only in a market

71
Q

Rationing / allocative function

A

prices allocate scarce resources between competing uses

72
Q

Regulation

A

involves the imposition of rules, controls and constraints, which restrict freedom of economic action in the marketplace

73
Q

Renewable resource

A

a resource, such as timber, that with careful management can be renewed as it is used

74
Q

Secondary market

A

a market that comes into existence when the primary market is not allowed to function properly

75
Q

Signalling function

A

prices provide information to buyers and sellers

76
Q

Social benefit

A

the total benefit of an activity, including the external benefit as well as the private benefit

77
Q

Social benefit maximisation

A

occurs when MSC=MSB

78
Q

Social cost

A

the total cost of an activity, including the external cost as well as the private cost

79
Q

Specialisation

A

a worker only performing one task or a narrow range of tasks

80
Q

Speculation

A

occurs when people buy or sell a good or service because they believe the price is going to rise or fall in the future. Successful speculation means people benefit from capital gains or avoid capital losses

81
Q

Subsidy

A

a payment made by government, usually to producers, for each unit of the subsidised good they produce. Consumers can also be subsidised: for example, bus passes given to children to enable them to travel on busses for free or at a reduced price

82
Q

Supply

A

the quantity of a good or service that firms plan to sell at given prices in a given period of time

83
Q

Taxation

A

a tax is a compulsory levy imposed by the government or some other authority to pay for its activities. Taxes can be used to achieve other objectives, such as reduced consumption of demerit goods

84
Q

Unit tax or specific tax

A

a tax levied on a unit of a good, irrespective of the good’s price

85
Q

Utility industry

A

an industry, such as the post, which delivers its service to millions of separate customers

86
Q

Wealth

A

a stock of assets that a person or firm owns

87
Q

Welfare benefits

A

transfers of money from the government to people in low income groups or with special needs (e.g. disabled people.)

A Level Economics (15 decks)

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