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Economics A2 > Unit one: key words > Flashcards

Unit one: key words Flashcards

1
Q

Allocative efficiency

A

Producing the mix of goods and services that society values the most.

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2
Q

Buffer stock

A

An intervention system that aims to stabilise prices.

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3
Q

Capital

A

Productive resources.

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4
Q

Command economy

A

An economic system where all decisions about resource allocation are made centrally by the state.

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5
Q

Complementary good

A

A product generally consumed together with another, e.g. fish and chips.

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6
Q

Composite demand

A

When a good is demanded for more than one distinct purpose.

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7
Q

Cross elasticity of demand

A

The responsiveness of quantity demanded of one good to the change in price of another good.

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8
Q

Demand

A

The amount of a product that consumers are willing and able to buy at each given price level.

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9
Q

Demerit good

A

A good that would be over-consumed in a free market as it brings less overall benefit to consumers than they realise.

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10
Q

Depreciation

A

The rate at which capital loses value over time.

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11
Q

Derived demand

A

When the demand for a product or factor of production comes from the demand for another product.

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12
Q

Diseconomies of scale

A

Where an increase in the scale of production leads to an increase in average total costs for firms.

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13
Q

Disequilibrium

A

When supply in a market does not meet demand.

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14
Q

Division of labour

A

Breaking the production process down into a sequence of tasks, with workers assigned to particular tasks.

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15
Q

Economic goods

A

Goods that are scarce and therefore have an opportunity cost in consumption.

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16
Q

Economic welfare

A

The benefit or satisfaction an individual gets from the allocation of resources.

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17
Q

Economies of scale

A

Where an increase in the scale of production leads to reductions in average total costs for firms.

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18
Q

Effective demand

A

Demand backed up by the ability to pay for a good or service.

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19
Q

Enterprise

A

The risk-taking role of business owners in combining other factors of production.

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20
Q

Equilibrium

A

The market situation where planned demand equals planned supply and there is no tendency for change.

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21
Q

Excess demand

A

When demand is greater than supply at a given price.

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22
Q

Excess supply

A

When supply is greater than demand at a given price.

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23
Q

Externalities

A

Spillover effects to third parties of a market transaction.

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24
Q

Factors of production

A

Capital equipment, enterprise, land and labour.

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25
Q

Factor market

A

The market for a factor of production that makes other goods or services.

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26
Q

Fixed costs

A

Costs of production that do not vary with output.

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27
Q

Free goods

A

Goods that have no opportunity cost in consumption, e.g. air.

28
Q

Free market economy

A

One in which there is very little government intervention in the allocation of resources.

29
Q

Free-rider problem

A

Where some consumers benefit from other consumers purchasing a good, especially in the case of public goods.

30
Q

Government failure

A

When government intervention to correct market failure does not improve the allocation of resources.

31
Q

Incidence of tax

A

The proportion of tax passed on to the consumer.

32
Q

Income elasticity of demand

A

The responsiveness of quantity demanded to a change in income.

33
Q

Indirect tax

A

A tax on spending.

34
Q

Inferior goods

A

Goods or services that will see a fall in demand when income increases.

35
Q

Joint supply

A

When the production of one good results in the production of another.

36
Q

Market

A

A situation where buyers are in contact with sellers of a good or service.

37
Q

Maximum price

A

A price ceiling which the price of a good or service is not allowed to increase above.

38
Q

Merit good

A

A good or service that would be under-consumed in a free market, as individuals do not fully perceive the benefits from consumption.

39
Q

Microeconomics

A

Study of individual markets.

40
Q

Minimum price

A

A price floor which the price of a good or service is not allowed to decrease below.

41
Q

Mixed economy

A

An economic system where resources are allocated by state planning and market forces.

42
Q

Monopoly

A

A market structure dominated by a single seller of a good or service.

43
Q

Negative externalities

A

Costs imposed on a third party not involved with the consumption or production of the good.

44
Q

Normal good

A

A good or service that will see an increase in demand as income rises.

45
Q

Normative statements

A

Opinions that require value judgements to be made.

46
Q

Oligopoly

A

A market structure where a few large firms dominate.

47
Q

Opportunity cost

A

The next best alternative given up when an economic decision is made.

48
Q

Partial market failure

A

Where the free market provides a product but with a misallocation of resources.

49
Q

Perfect competition

A

An extremely competitive market structure.

50
Q

Pollution permit

A

A permit sold to firms by the government, allowing them to pollute up to a certain limit.

51
Q

Positive externality

A

A beneficial spillover effect to third parties of a market transaction.

52
Q

Positive statements

A

Statements that can be tested against data to be declared either true or false.

53
Q

Price elasticity of demand

A

The responsiveness of quantity demanded to a change in price.

54
Q

Price elasticity of supply

A

The responsiveness of quantity supplied to a change in price.

55
Q

Private good

A

A good that is both excludable and rival in consumption.

56
Q

PPC/PPB

A

Production possibility curve/boundary. A diagram showing the maximum possible output that can be achieved given a fixed amount of resources.

57
Q

Productive efficiency

A

When a firm operates at minimum average total cost.

58
Q

Productivity

A

A measure of efficiency, typically expressed as output per person per hour.

59
Q

Profit

A

When total income or revenue of a firm is greater than total costs.

60
Q

Public good

A

A good that possesses the characteristics of non excludability and non-rivalry in consumption.

61
Q

Quasi-public good

A

A good that has some of the characteristics of a public good, but is not completely non-excludable or non-rival.

62
Q

Scarcity

A

The economic problem. Society’s wants exceed the amount available of the factors of production.

63
Q

Specialisation

A

The production of a limited range of goods by an individual factor of production, firm or country, in co-operation with others so that together a complete range of goods is produced.

64
Q

Substitutes

A

Goods that can be used as alternatives to other goods, e.g. butter and margarine.

65
Q

Supply

A

The quantity of a product offered for sale by firms at a given price.

66
Q

Variable costs

A

Costs of production that vary with output.

Economics A2 (5 decks)

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