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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
Externality
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
26
Finite resource
a resource, such as oil, which is scarce and runs out as it is used
27
Fiscal policy
a government policy that uses the fiscal instruments of taxation, government spending and the government’s budgetary position to achieve particular policy objectives
28
Free-rider:
somebody who benefits from a good or service without paying for it
29
Good
a good yields utility, unlike a “bad” which yields disutility
30
Government failure
occurs when government intervention in an economy is ineffective, wasteful or damaging
31
Government transfers
a payment of money from a government to an individual for which no good or service is given in return
32
Immobility of labour
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.)
33
Incentive function
prices create incentives for consumers and firms to behave in certain ways
34
Income
a flow of money received (e.g. as a wage) from supplying labour
35
Income elasticity of demand
the proportionate change in demand for a good following an initial proportionate change in consumers’ income
36
Increase in demand
a rightward shift of the demand curve
37
Increase in supply
a rightward shift of the supply curve
38
Inferior good
a good for which demand decreases as income rises
39
Information problem
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
Intervention price
a price at which a buffer stock agency starts to buy or sell a good, thereby adding to or depleting the buffer stock
41
Margin
refers to the last unit undertaken of an activity
42
Marginal benefit
the benefit resulting from the last unit of a good
43
Marginal cost
the cost of the last unit of a good
44
Market demand
the quantity of a good or service that all the consumers in the market are willing and able to buy
45
Market disequilibrium
when the market failures to clear. The market plans of consumers and firms are inconsistent with each other
46
Market equilibrium
when planned demand equals planned supply in the market
47
Market failure
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
Market supply
the quantity of a good or service that all the firms in a market are willing to sell
49
Merit good
a good, such a healthcare, for which the social benefits of consumption exceed the private benefits.
50
Monopoly
a market dominated by one firm
51
Nationalisation
the state taking over firms or industries previously in the private sector
52
Natural monopoly
a market in which there is only room for one firm benefiting to the full from economies of scale
53
Normal good
a good for which demand increases as income rises
54
Normative statement
a statement of opinion based on a value judgement
55
Positive statement
a statement of fact, or one that can be scientifically tested
56
Price ceiling
a price above which it is illegal to trade. Price ceilings, or maximum legal prices, can distort markets by creating excess demand
57
Price elasticity of demand
the proportionate change in demand for a good following an initial proportionate change in the good’s own price
58
Price elasticity of supply
the proportionate change in supply of a good following an initial proportionate change in the good’s own price
59
Price floor
a price below which it is illegal to trade. Price floors, or minimum legal prices, can distort markets by creating excess supply
60
Private benefit maximisation
occurs when MPC = MPB
61
Private good
a good, such as an orange, that is excludable and rival
62
Privatisation
the state selling nationalised firms or industries to the private sector
63
Production
converts inputs or factor services into outputs of goods
64
Productive efficiency
occurs when a firms minimises average costs and produces at the lowest point on its average cost curve
65
Produce efficiency (for the whole economy)
the whole economy is productively efficient when producing on its production possibility frontier
66
Productivity
output per unit of input (e.g. labour productivity is output per worker.)
67
Profit
the difference between total sales revenue and total costs of production
68
Progressive taxation
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
Public good
a good, such as a radio programme, that is non-excludable and non-rival
70
Pure monopoly
one firm only in a market
71
Rationing / allocative function
prices allocate scarce resources between competing uses
72
Regulation
involves the imposition of rules, controls and constraints, which restrict freedom of economic action in the marketplace
73
Renewable resource
a resource, such as timber, that with careful management can be renewed as it is used
74
Secondary market
a market that comes into existence when the primary market is not allowed to function properly
75
Signalling function
prices provide information to buyers and sellers
76
Social benefit
the total benefit of an activity, including the external benefit as well as the private benefit
77
Social benefit maximisation
occurs when MSC=MSB
78
Social cost
the total cost of an activity, including the external cost as well as the private cost
79
Specialisation
a worker only performing one task or a narrow range of tasks
80
Speculation
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
Subsidy
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
Supply
the quantity of a good or service that firms plan to sell at given prices in a given period of time
83
Taxation
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
Unit tax or specific tax
a tax levied on a unit of a good, irrespective of the good’s price
85
Utility industry
an industry, such as the post, which delivers its service to millions of separate customers
86
Wealth
a stock of assets that a person or firm owns
87
Welfare benefits
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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