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IB Economics SL 2013+ > Unit 1 Microeconomics > Flashcards

Unit 1 Microeconomics Flashcards

1
Q

actual growth

A

occurs when previously unemployed factors of production are brought to use; it is represented by a movement from a point within a PPC to a new point nearer to the PPC

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2
Q

actual output

A

production of goods and services that is achieved in an economy in a given time period

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3
Q

ad valorem taxes

A

indirect taxes as a fixed percentage of the price of the good or service

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4
Q

capital

A

factor of production that is made by humans and used to produce goods and services; it occurs as a result of investment

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5
Q

cartel

A

formal agreement between firms in an industry to undertake concerted actions to limit competition

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6
Q

ceteris paribus

A

(“all other things being equal”) assumption that there is a change in one of the variables, holding the other variables constant

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7
Q

competition

A

occurs when there are many buyers and sellers acting independently, so that no one has the ability to influence the price at which the product is sold in the market

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8
Q

complementary good

A

goods used in combination with each other; they have a negative XED

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9
Q

consumer surplus

A

additional benefit received by consumers by paying a price that is lower than they are willing to pay

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10
Q

credit

A

borrowed money

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11
Q

cross elasticity of demand (XED)

A

measure of responsiveness of the quantity of one good demanded in response to a change in the price of a related good

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12
Q

demerit goods

A

products that are considered to be harmful for people

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13
Q

demand

A

quantity of a product that consumers are willing and able to buy at a given price in a given time period

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14
Q

determinants of demand

A

variables (other than price) that can influence demand; a change in any determinant of demand causes a shift of the demand curve

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15
Q

determinants of supply

A

variables (other than price) that can influence supply; a change in any determinant of supply causes a shift of the supply curve

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16
Q

direct taxes

A

taxes directly paid to the government, e.g. income tax

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17
Q

economic goods

A

any good or service that requires scarce resources and thus has a price

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18
Q

elastic demand

A

change in price of a good and service will cause a proportionately larger change in quantity demanded

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19
Q

elasticity

A

measure of the responsiveness of a variable to changes in any of the variable’s determinants

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20
Q

entrepreneurship

A

factor of production that brings together the other three factors of production with the aim of making profit; it involves risk-taking

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21
Q

equilibrium

A

point where the quantity demanded is equal to quantity supplied; this creates the market clearing prices, where there is no surplus or shortage

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22
Q

excess demand

A

(shortage) occurs where the price of a good is lower than the equilibrium price, such that the quantity demanded is greater than the quantity supplied

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23
Q

excess supply

A

(surplus) occurs where the price of a good is higher than the equilibrium price, such that the quantity supplied is greater than the quantity demanded

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24
Q

factors of production

A

land, labour, capital and entrepreneurship that are used in production

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25
Q

flat rate taxes

A

indirect taxes where a fixed amount is added to the price of a good or service

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26
Q

free good

A

any good that is not scarce, such as air or sea water, und thus has no price

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27
Q

incentive function of price

A

prices give producers the incentive either to increase or decrease the quantity they supply; a rising price gives the producers the incentive to increase the quantity supplied, as the higher price may allow them to earn higher revenues

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28
Q

incidence of tax

A

(burden of tax) amount of an indirect tax paid by consumers of a good or producers of a good

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29
Q

income elasticity of demand (YED)

A

measure of the responsiveness of demand for a good to a change in consumers’ income

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30
Q

indirect taxes

A

taxes placed upon the expenditure on a good and service, e.g. sales tax, MWSt

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31
Q

inelastic demand

A

change in price of a good and service will cause a proportionately smaller change in quantity demanded

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32
Q

inferior good

A

good whose demand falls as income rises; an inferior good has negative YED

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33
Q

informal market

A

part of an economy that lies outside the formal economy, consisting of economic activities that are unregistered and legally unregulated

34
Q

labour

A

work done by humans that is used to produce goods and services

35
Q

land

A

all raw materials that are used to produce goods and services

36
Q

law of demand

A

as the price of a product increases, the quantity demanded decreases, ceteris paribus

37
Q

law of supply

A

as the price of a product increases, the quantity supplied increases, ceteris paribus

38
Q

macroeconomics

A

study of how the economy as a whole works

39
Q

market economy

A

economy where individuals and firms own the resources and make the economic
decisions; prices are set by demand and supply

40
Q

manufactured goods

A

goods that have been processed by workers

41
Q

marginal private benefit

A

extra benefit to the consumer of consuming an additional unit of output (MPB)

42
Q

marginal private cost

A

extra (private) cost to the producer of producing an additional unit of output (MPC)

43
Q

marginal social benefit

A

extra benefit of consuming an additional unit of output, including both the private benefit and the external benefit (MSB)

44
Q

marginal social cost

A

extra cost to society of producing an additional unit of output, including both the private cost and the external cost (MSC)

45
Q

market

A

place where buyers and sellers of a product come together to make an exchange, but doesn’t need to be a physical place

46
Q

market failure

A

occurs when the production of a good doesn’t take place at the socially efficient level of output (allocative efficiency where MSC = MSB)

47
Q

merit good

A

products that are considered to be beneficial for people

48
Q

maximum price

A

(price ceiling) price set by the government above which the market price is not allowed to rise in order to support the consumers of the product (essential goods, house rentals)

49
Q

microeconomics

A

study of the behaviour (supply and demand) of individual markets

50
Q

minimum price

A

(price floor) price set by the government below which the market price is not allowed to fall in order to support the producers of the product (minimum wages, agricultural products)

51
Q

negative externality of consumption

A

external costs to a third party that occur when a product is consumed

52
Q

negative externality of production

A

external costs to a third party that occur when a product is produced

53
Q

normal good

A

good whose demand rises as income rises; a normal good has positive YED

54
Q

normative economics

A

deals with areas that are open to personal opinion

55
Q

opportunity cost

A

next best alternative foregone when an economic decision is made

56
Q

planned economy

A

economy where the government owns all resources and makes all economic decisions

57
Q

positive economics

A

deals with areas that can be proven wrong or right by looking at the facts

58
Q

positive externality of consumption

A

external benefits to a third party that occur when a product is consumed

59
Q

positive externality of production

A

external benefits to a third party that occur when a product is produced

60
Q

potential growth

A

occurs when the quantity and/or quality of factors of production within an economy is increased; it is represented by an outward shift of the PPC

61
Q

potential output

A

possible production that would be achieved in an economy if all available factor were employed

62
Q

price controls

A

setting of minimum or maximum prices by the government so that prices are unable to adjust to their equilibrium level determined by demand and supply

63
Q

price elasticity of demand (PED)

A

measure of the responsiveness of the quantity demanded of a good and service to a change in its price

64
Q

price elasticity of supply (PES)

A

measure of the responsiveness of the quantity supplied of a good and service to a change in its price

65
Q

price taker

A

in perfect competition, each firm is a price taker, taking the equilibrium price set in the market

66
Q

primary products

A

(commodity) any product that is produced in the primary sector, which includes agriculture, forestry, fishing and extractive industries

67
Q

primary sector

A

part of the economy that is dominated by agriculture, forestry, fishing and extractive activities such as mining

68
Q

private sector

A

sector owned by private individuals that produce goods and services

69
Q

producer surplus

A

additional benefit received by producers by receiving a price that is higher than the price they were willing to receive

70
Q

product differentiation

A

strategy employed by producers where they attempt to make their products different from those of their competitors; it is a form of non-price competition

71
Q

production possibility curve (PPC)

A

shows the maximum combinations of goods and services that can be produced
by an economy in a given time period, if all resources in the economy are being used fully and efficiently

72
Q

public good

A

product which is non-rivalrous and non-excludable and so would not be provided at all in a purely free market economy

73
Q

public sector

A

sector owned by the government that provides goods and services

74
Q

rationing

A

method used to divide something up between interested users by making resource allocation and output/income distribution decisions

75
Q

revenue

A

income received by a firm from selling its product

76
Q

scarcity

A

excess of human wants over what can actually be allocated to fulfill these wants

77
Q

secondary sector

A

part of an economy that includes manufacturing

78
Q

signalling function of price

A

prices give signal to both producers and consumers: a rising price gives a signal to producers that they should increase their quantity supplied and signals to consumers that they should decrease the quantity demanded, and vice versa

79
Q

subsidy

A

amount of money given to producers of a product by the government

80
Q

substitute good

A

goods which can be used in place of each other; they have positive XED

IB Economics SL 2013+ (4 decks)

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