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Economics > Unit 2: The Allocation of resources > Flashcards

Unit 2: The 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 who undertake economic activities and make economic decisions

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5
Q

Private sector

A

Firms owned by shareholders and individuals

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6
Q

Economic system

A

The insitutions, organisations and mechanisms that influence economic behaviour and determine how resources are allocated.

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7
Q

Planned economic system

A

An economic system where the government makes the crucial decisions, land and capital are state-owned and resources are allocated by directives from the government

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8
Q

Directives

A

state instructions given to state-owned enterprises

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9
Q

Mixed economic system

A

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

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10
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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11
Q

Price mechanism

A

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

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12
Q

Capital-intensive

A

The use of a high proportion of capital relative to labour

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13
Q

Labour-intensive

A

The use of a high proportion of labour relative to capital

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14
Q

Demand

A

The willingness and ability to buy a product

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15
Q

Supply

A

The willingness and ability to sell a product

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16
Q

Market equilibrium

A

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

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17
Q

Market disequilibrium

A

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

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18
Q

Market demand

A

Total demand for a product

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19
Q

Aggregation

A

The addition of individual components to arrive at a total amount

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20
Q

Extension in demand

A

A rise in the quantity demanded caused by a fall in the price of the product itself

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21
Q

Contraction in demand

A

A fall in the quantity demanded caused by a rise in the price of the product itself

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22
Q

Changes in demand

A

Shifts in the demand curve

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23
Q

Increase in demand

A

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

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24
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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25
Q

Normal goods

A

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

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26
Q

Inferior goods

A

A product whose demand decreases when income increases and increases when income falls.

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27
Q

Substitute

A

A product that can be used in place of another

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28
Q

Complement

A

A product that is used together with another product

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29
Q

Ageing population

A

An increase in the average age of the population

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30
Q

Birth rate

A

The number of live births per thousand of the population in a year

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31
Q

Market supply

A

Total supply of a product

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32
Q

Extension in supply

A

A rise in the quantity supplied caused by a rise in the price of the product itself

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33
Q

Contraction in supply

A

A fall in the quantity supplied caused by a fall in the price of the product itself

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34
Q

Changes in supply

A

Changes in supply conditions causing shifts in the supply curve

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35
Q

Increase in supply

A

A rise in supply at any given price, causing the supply curve to shift to the right

36
Q

Decrease in supply

A

A decrease in supply at any given price, causing the supply curve to shift to the left.

37
Q

Unit cost

A

The average cost of production. It is found by dividing total cost by output

38
Q

Improvements in technology

A

Advances in the quality of capital goods and methods of production

39
Q

Direct taxes

A

Taxes on the income and wealth of individuals and firms

40
Q

Indirect taxes

A

Taxes on goods and services

41
Q

Tax

A

A payment to the government

42
Q

Subsidy

A

A payment by a government to encourage the production or consumption of a product

43
Q

Equilibrium price

A

The price where demand and supply are equal

44
Q

Excess supply

A

The amount by which supply is greater than demand

45
Q

Excess demand

A

The amount by which demand is greater than supply

46
Q

Price elasticity of demand (PED)

A

A measure of the responsiveness of the quantity demanded to a change in price.

47
Q

Elastic demand

A

When the quantity demanded changes by a greater percentage than the change in price.

48
Q

Inelastic demand

A

When the quantity demanded changes by a smaller percentage than the change in price

49
Q

Perfectly elastic demand

A

When a change in price causes a complete change in the quantity demanded

50
Q

Perfectly inelastic demand

A

When a change in price has no effect on the quantity demanded

51
Q

Unit elasticity of demand

A

When a change in price causes an equal change int eh quantity demanded, leaving revenue unchanged

52
Q

Price elasticity of supply (PES)

A

A measure of the responsiveness of the quantity supplied to a change in price.

53
Q

Elastic supply

A

When the quantity supplied changes by a greater percentage than the change in price.

54
Q

Inelastic supply

A

When the quantity demanded changes by a smaller percentage than the change in price

55
Q

Perfectly inelastic supply

A

When a change in price has no effect on the quantity supplied

56
Q

Perfectly elastic supply

A

When a change in price causes a complete change in the quantity supplied

57
Q

Unit PES

A

When a change in price causes an equal percentage change in the quantity supplied

58
Q

Public sector

A

The part of the economy controlled by the government

59
Q

State-owned enterprises (SOEs)

A

Organisations owned by the government which sell products

60
Q

Privatisation

A

The sale of public sector assets to the private sector

61
Q

Market failure

A

Market forces resulting in an inefficient allocation of resources

62
Q

Free rider

A

Someone who consumes a good or service without paying for it

63
Q

Allocative efficiency

A

When resources are allocated to produce the right products in the right quantities

64
Q

Productively efficient

A

When products are produced at the lowest possible cost and making full use of resources

65
Q

Dynamic efficiency

A

Efficiency occurring over time as a result of investment and innovation

66
Q

Third parties

A

Those not directly involved in producing or consuming a product

67
Q

Social benefits

A

The total benefits to a society of an economic activity

68
Q

Social costs

A

The total costs to a society of an economic activity

69
Q

Private benefits

A

Benefits received by those directly consuming or producing a product

70
Q

Private costs

A

Costs borne by those directly consuming or producing a product

71
Q

External costs

A

Costs imposed on third parties

72
Q

External benefits

A

Benefits enjoyed by third parties

73
Q

Socially optimum output

A

The level of output where social cost equals social benefit and society’s welfare is maximised

74
Q

Merit goods

A

Products which the government considers consumers do not fully appreciate how beneficial they are and so which will be under-consumed if left to market forces. Such goods generate positive externalities.

75
Q

Demerit goods

A

Products which the government considers consumers do not fully appreciate how harmful they are and so which will be over-consumed if left to market forces. Such goods generate negative externalities.

76
Q

Public good

A

A product which is non-rival and non-excludable.

77
Q

Private good

A

A product which is both rival and excludable.

78
Q

Monopoly

A

A single seller

79
Q

Price fixing

A

When two or more firms agree to sell a product at the same time.

80
Q

Rationing

A

A limit on the amount that can be consumed

81
Q

Lottery

A

The drawing of tickets to decide who will get the products

82
Q

Nationalisation

A

Moving the ownership and control of an industry from the private sector to the government

83
Q

Public corporation

A

A business organisation owned by the government which is designed to act in the public interest

84
Q

Cost benefit analysis

A

A method of assessing investment projects which takes into account social costs and benefits.

85
Q

Multinational companies (MNCs)

A

Companies which produce in more than one country

Economics (4 decks)

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