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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
Normal goods
A product whose demand increases when income increases and decreases when income falls
26
Inferior goods
A product whose demand decreases when income increases and increases when income falls.
27
Substitute
A product that can be used in place of another
28
Complement
A product that is used together with another product
29
Ageing population
An increase in the average age of the population
30
Birth rate
The number of live births per thousand of the population in a year
31
Market supply
Total supply of a product
32
Extension in supply
A rise in the quantity supplied caused by a rise in the price of the product itself
33
Contraction in supply
A fall in the quantity supplied caused by a fall in the price of the product itself
34
Changes in supply
Changes in supply conditions causing shifts in the supply curve
35
Increase in supply
A rise in supply at any given price, causing the supply curve to shift to the right
36
Decrease in supply
A decrease in supply at any given price, causing the supply curve to shift to the left.
37
Unit cost
The average cost of production. It is found by dividing total cost by output
38
Improvements in technology
Advances in the quality of capital goods and methods of production
39
Direct taxes
Taxes on the income and wealth of individuals and firms
40
Indirect taxes
Taxes on goods and services
41
Tax
A payment to the government
42
Subsidy
A payment by a government to encourage the production or consumption of a product
43
Equilibrium price
The price where demand and supply are equal
44
Excess supply
The amount by which supply is greater than demand
45
Excess demand
The amount by which demand is greater than supply
46
Price elasticity of demand (PED)
A measure of the responsiveness of the quantity demanded to a change in price.
47
Elastic demand
When the quantity demanded changes by a greater percentage than the change in price.
48
Inelastic demand
When the quantity demanded changes by a smaller percentage than the change in price
49
Perfectly elastic demand
When a change in price causes a complete change in the quantity demanded
50
Perfectly inelastic demand
When a change in price has no effect on the quantity demanded
51
Unit elasticity of demand
When a change in price causes an equal change int eh quantity demanded, leaving revenue unchanged
52
Price elasticity of supply (PES)
A measure of the responsiveness of the quantity supplied to a change in price.
53
Elastic supply
When the quantity supplied changes by a greater percentage than the change in price.
54
Inelastic supply
When the quantity demanded changes by a smaller percentage than the change in price
55
Perfectly inelastic supply
When a change in price has no effect on the quantity supplied
56
Perfectly elastic supply
When a change in price causes a complete change in the quantity supplied
57
Unit PES
When a change in price causes an equal percentage change in the quantity supplied
58
Public sector
The part of the economy controlled by the government
59
State-owned enterprises (SOEs)
Organisations owned by the government which sell products
60
Privatisation
The sale of public sector assets to the private sector
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 making 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 borne by those directly consuming or producing a product
71
External costs
Costs imposed on third parties
72
External benefits
Benefits enjoyed by third parties
73
Socially optimum output
The level of output where social cost equals social benefit and society's welfare is maximised
74
Merit goods
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
Demerit goods
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
Public good
A product which is non-rival and non-excludable.
77
Private good
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 time.
80
Rationing
A limit on the amount that can be consumed
81
Lottery
The drawing of tickets to decide who will get the products
82
Nationalisation
Moving the ownership and control of an industry from the private sector to the government
83
Public corporation
A business organisation owned by the government which is designed to act in the public interest
84
Cost benefit analysis
A method of assessing investment projects which takes into account social costs and benefits.
85
Multinational companies (MNCs)
Companies which produce in more than one country

Economics (4 decks)

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