Unit 3 Flashcards
Absolute poverty
The idea of being unable to afford basics such as food water or clothes
Abnormal profit
anything above normal profit (Price>AC)
Allocative efficiency
found where AR=MC
Average costs
the cost of producing each unit of output produced, calculated by; Total costs
__________
output
Average Revenue
the selling price - the amount of revenue a firm will receive for selling one unit of output.
Backward sloping supply curve
a supply curve that describes how workers will change the quantity of leisure hours they employ following fluctuations in the hourly wage rate.
Barriers to entry
obstacles to new firms from entering a market. Such as start up costs, limit pricing, economies of scale, predatory pricing or brand loyalty
Barriers to exit
obstacles to a firm from leaving a market. Such as sunk costs, contracts and advertising.
Collective bargaining
where a body speaks or negotiates on behalf of a group of people.
Contestable market
a market structure where there are no barriers to entry or exit and all costs are the same for both incumbent firms and new firms.
Derived demand
where the demand for a factor of production is based on the output it can produce.
Dominant monopoly
a monopoly where the main firm has over 40% market powers.
Dynamic Efficiency
Efficiency in terms of developing and introducing new production techniques and new products
Earnings
wages plus overtime, bonuses and commission
Economically inactive
Working age and physically able people who are neither in employment, nor unemployed, and so are not part of the labour force
Economic rent
a surplus paid to a factor of production above what is needed to keep it in its current occupation (wage-transfer earnings)
Economically active
Those in employment plus those unemployed
Elasticity of supply of labour
The responsiveness of the supply of labour to a change in the wage rate. Found by % change in supply divided by % change in wage.
Elasticity of demand for labour
The responsiveness of the demand for labour to a change in the wage rate. Found by % change in demand divided by % change in wage.
Employment rate
The proportion of the labour force who are employed
EU Directive
EU legislation that sets certain regulations about employment- pregnancy leave, Discrimination, working hours etc.
Internal Economies of scale
Economies of scale that occur within the firm as a result of its growth
Internal diseconomies of scale
Diseconomies of scale experienced by a firm caused by its growth
Geographical immobility
the obstacle of being unable to move from one area to another in order to change occupations. Could be due to moving charges, cultural differences, family ties
Flexible Labour market
A market that adjusts quickly and easily to changes in demand and supply so there is little unemployment.
Growth maximisation
the objective of increasing the size of a company as much as possible. Where AC=AR
Human capital
the skills and qualifications that an individual possesses.
External diseconomies of scale
Diseconomies of scale resulting from the growth of the industry, affecting firms within the industry
Income effect
when an increase in the wage rate causes workers to decrease the amount of hours they work in order to maintain their current income whilst gaining more leisure hours.
External economies of scale
Economies of scale that result from the growth of an industry and benefit firms within the industry
Fixed costs
Costs that do not change with a change of output
Labour force
participation rate The proportion of working age people who are economically active
Minimum efficient scale
The lowest level of output at which full advantage can be taken of economies of scale
Constant returns to scale
Long run average cost remaining unchanged when the scale of production increase