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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
Factor market
The market for a factor of production that makes other goods or services.
26
Fixed costs
Costs of production that do not vary with output.
27
Free goods
Goods that have no opportunity cost in consumption, e.g. air.
28
Free market economy
One in which there is very little government intervention in the allocation of resources.
29
Free-rider problem
Where some consumers benefit from other consumers purchasing a good, especially in the case of public goods.
30
Government failure
When government intervention to correct market failure does not improve the allocation of resources.
31
Incidence of tax
The proportion of tax passed on to the consumer.
32
Income elasticity of demand
The responsiveness of quantity demanded to a change in income.
33
Indirect tax
A tax on spending.
34
Inferior goods
Goods or services that will see a fall in demand when income increases.
35
Joint supply
When the production of one good results in the production of another.
36
Market
A situation where buyers are in contact with sellers of a good or service.
37
Maximum price
A price ceiling which the price of a good or service is not allowed to increase above.
38
Merit good
A good or service that would be under-consumed in a free market, as individuals do not fully perceive the benefits from consumption.
39
Microeconomics
Study of individual markets.
40
Minimum price
A price floor which the price of a good or service is not allowed to decrease below.
41
Mixed economy
An economic system where resources are allocated by state planning and market forces.
42
Monopoly
A market structure dominated by a single seller of a good or service.
43
Negative externalities
Costs imposed on a third party not involved with the consumption or production of the good.
44
Normal good
A good or service that will see an increase in demand as income rises.
45
Normative statements
Opinions that require value judgements to be made.
46
Oligopoly
A market structure where a few large firms dominate.
47
Opportunity cost
The next best alternative given up when an economic decision is made.
48
Partial market failure
Where the free market provides a product but with a misallocation of resources.
49
Perfect competition
An extremely competitive market structure.
50
Pollution permit
A permit sold to firms by the government, allowing them to pollute up to a certain limit.
51
Positive externality
A beneficial spillover effect to third parties of a market transaction.
52
Positive statements
Statements that can be tested against data to be declared either true or false.
53
Price elasticity of demand
The responsiveness of quantity demanded to a change in price.
54
Price elasticity of supply
The responsiveness of quantity supplied to a change in price.
55
Private good
A good that is both excludable and rival in consumption.
56
PPC/PPB
Production possibility curve/boundary. A diagram showing the maximum possible output that can be achieved given a fixed amount of resources.
57
Productive efficiency
When a firm operates at minimum average total cost.
58
Productivity
A measure of efficiency, typically expressed as output per person per hour.
59
Profit
When total income or revenue of a firm is greater than total costs.
60
Public good
A good that possesses the characteristics of non excludability and non-rivalry in consumption.
61
Quasi-public good
A good that has some of the characteristics of a public good, but is not completely non-excludable or non-rival.
62
Scarcity
The economic problem. Society’s wants exceed the amount available of the factors of production.
63
Specialisation
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
Substitutes
Goods that can be used as alternatives to other goods, e.g. butter and margarine.
65
Supply
The quantity of a product offered for sale by firms at a given price.
66
Variable costs
Costs of production that vary with output.

Economics A2 (5 decks)

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