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IGCSE Economics > Unit 2 Allocation of Resources > Flashcards

Unit 2 Allocation of Resources Flashcards

1
Q

Microeconomics

A

the study of the behaviour and decisions of households and firms and the performance of individual markets.

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2
Q

Macroeconomics

A

the study of the whole economy

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3
Q

Market

A

an arrangement which brings buyers into contact with sellers

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4
Q

Economic agents

A

those people who undertake economic activities and make economic decisions

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5
Q

Economic systems

A

the institutions, organisations and mechanisms that influence economic behaviour and determine how resources are allocated

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6
Q

Planned economic system

A

an economic system where the government makes the crucial decisions, land and capital are state-owned and directives allocate resources

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7
Q

Mixed economic system

A

an economy in which both the private and public sectors play an important role

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8
Q

Market economic system

A

an economic system where consumers determine what is produced, resources are allocated by the price mechanism and land and capital are privately owned

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9
Q

Price mechanism

A

the way the decisions made by households and firms interact to decide the allocation of resources

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10
Q

Capital

A

intensive- the use of a high proportion of capital relative to labour

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11
Q

Labour

A

intensive- the use of a high proportion of labour relative to capital

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12
Q

Market equilibrium

A

a situation where demand and supply are equal at the current price

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13
Q

Market disequilibrium

A

a situation where demand and supply are not equal at the current price

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14
Q

Demand

A

the willingness and ability to buy a product

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15
Q

Market demand

A

total demand for a product

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16
Q

Aggregation

A

the addition of individual components to arrive at a total amount

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17
Q

Extension in demand

A

a rise in the quantity demanded caused by a fall in the product’s price.

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18
Q

Contraction in demand

A

a fall in the quantity demanded caused by a rise in the product’s price.

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19
Q

Changes in demand

A

shifts in the demand curve

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20
Q

increase in demand

A

a rise in demand at any given price, causing the demand curve to shift to the right

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21
Q

Decrease in demand

A

a fall in demand at any given price, causing the demand curve to shift to the left

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22
Q

Normal goods

A

a product whose demand increases when income increases and decreases when income falls

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23
Q

Inferior goods

A

a product whose demand decreases when income increases and increases when income falls

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24
Q

Substitute

A

a product that can be used in place of another

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25
Complement
a product that is used together with another product
26
Ageing population
an increase in the average age of the population
27
Birth rate
the number of live births per thousand of the population in a year
28
Supply
the willingness and ability to sell a product
29
Market supply
total supply of a product
30
Extension in supply
a rise in the quantity supplied caused by a rise in the product's price.
31
Contraction in supply
a fall in the quantity supplied caused by a fall in the product's price.
32
Changes in supply
changes in supply conditions causing shifts in the supply curve
33
Increase in supply
a rise in supply at any given price, causing the supply curve to shift to the right
34
Decrease in supply
a fall in supply at any given price, causing the supply curve to shift to the left
35
Unit cost
the average cost of production. It is found by dividing the total cost by the output
36
Improvements in technology
advances in the quality of capital goods and methods of production
37
Direct taxes
taxes on the income and wealth of individuals and firms
38
Indirect taxes
taxes on goods and services
39
Tax
a payment to the government
40
Subsidy
a payment by the government to encourage the production or consumption of a product
41
Equilibrium price
the price where demand and supply are equal
42
Disequilibrium
a situation where demand and supply are not equal
43
Excess supply
the amount by which supply is greater than demand
44
Excess demand
the amount by which demand is greater than supply
45
Price elasticity of demand (PED)
a measure of the responsiveness of the quantity demanded to a change in price
46
Elastic demand
when the quantity demanded changes by a greater percentage than the change in price
47
Inelastic demand
when the quantity demanded changes by a smaller percentage than the change in price
48
Perfectly elastic demand
when a change in price causes a complete change in the quantity demanded
49
Perfectly inelastic demand
when a change in price has no effect on the quantity demanded
50
Unit elasticity of demand
when a change in price causes an equal change in the quantity demanded, leaving total revenue unchanged.
51
Price elasticity of supply (PES)
a measure of the responsiveness of the quantity supplied to a change in price
52
Elastic supply
when the quantity supplied changes by a greater percentage than the change in price
53
Inelastic supply
when the quantity supplied changes by a smaller percentage than the change in price
54
Perfectly elastic supply
when a change in price causes a complete change in the quantity supplied
55
Perfectly inelastic supply
when a change in price has no effect on the quantity supplied
56
Unit elasticity of supply
when a change in price causes an equal change in the quantity supplied
57
Public sector
the part of the economy controlled by the government
58
State
owned enterprises (SOEs) - organisations owned by the government which sell products
59
Privatisation
the sale of public assets to the private sector
60
Price mechanism
the system by which the market forces of demand and supply determine prices
61
Market failure
market forces resulting in an inefficient allocation of resources
62
Free rider
someone who consumes a good or service without paying for it
63
Allocative efficiency
when resources are allocated to produce the right products in the right quantities
64
Productively efficient
when products are produced at the lowest possible cost and make full use of resources
65
Dynamic efficiency
efficiency occurring over time as a result of investment and innovation
66
Third parties
those not directly involved in producing or consuming a product
67
Social benefits
the total benefits to a society of an economic activity
68
Social costs
the total costs to a society of an economic activity
69
Private benefits
benefits received by those directly consuming or producing a product
70
Private costs
costs made by those directly consuming or producing a product
71
External benefits
benefits enjoyed by those who are not involved in the consumption and production activities of others directly
72
External costs
costs imposed on those who are not involved in the consumption and production activities of others directly
73
Socially optimum output
the level of output where social cost equals social benefit, and society's welfare is maximised
74
Merit goods
products the government considers consumers do not fully appreciate how beneficial they are and will be under-consumed if left to market forces. Such goods generate positive externalities.
75
Demerit goods
products the government considers consumers do not fully appreciate how harmful they are and will be over-consumed if left to market forces. Such goods generate negative externalities.
76
Public good
a non-rival and non-excludable product hence needs to be financed by taxation.
77
Private goods
a product which is both rival and excludable
78
Monopoly
a single seller
79
Price fixing
when two or more firms agree to sell a product at the same price
80
Mixed economic system
an economy in which both the private and public sectors play an essential role
81
Rationing
a limit on the amount that can be consumed
82
Lottery
the drawing of tickets to decide who will get the products
83
Nationalisation
moving the ownership and control of an industry from the private sector to the government
84
Public corporation
a business organisation owned by the government which is designed to act in the public interest

IGCSE Economics (6 decks)

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