Vocab Flashcards
Substitutes
Goods that can be used in place of another
Subsidies
Grants given by the government to encourage the production or consumption of a particular good or service/ lower costs of production
Public good
Non rivalry— consumption doesn’t reduce availability
Non excludable— once it’s provided can’t stop someone from benefitting
Property rights
Legal entitlement to use and sale of property rights plus legal rights tat others have or do not have over a property
Specialisation
Where a production process is broken into many stages each done by a small group of people or an individual
PPF
A curve that shows the combination of two goods that can be produced in an economy if all resources are fully and efficiently employed
Producer surplus
The difference between the actual price a produce receives for its good and the lower price it is willing to accept
Private costs
Costs directly incurred by an individual consumer or producer when they engaged in an economic activity
Private benefits
Benefits directly gained by an individual consumer or producer when they snagged in an economic activity
Price mechanism
The interaction between demand and supply to resolve the issue of scarcity and infinite wants
PES
Measures the responsiveness of supply to a change in price
PED
Measures the responsiveness of demand for a good to a change in price
Positive statement
Statement that can be testified true or false by referring to facts
Normative statement
A form of value judgement and cannot be proven true or false
National Minimum Wage
Price floor on wages set by governments below which is illegal for employees to be workers
Mixed economy
An economy where resources are owned and allocated by both private sector and government
Minimum Guaranteed Price
Price floor set be government onto agriculture in order to stabilise prices and farmers’ income
Market Failure
When price mechanism fails to allocate resources efficiently
Indirect tax
Levied by the government onto a particular good or service to discourage its production or consumption to raise its production costs
YED
Measures the responsiveness of demand for a good to a change in income
Incidence of tax
The proportion of the tax paid by producers and consumers
Government failure
When the government intervention into an economic activity leads to net loss in economic welfare
Free Roder
Someone who receives the benefits that others have paid for without making any contributions themselves
Free Market economy
An economy where resources are all privately owned and the price mechanism will act to allocate scarce resources
External costs
Costs incurred by a third party which is not part of an economic transaction
External benefits
Benefits gained by a third part which is not part of an economic transaction
XED
Measures the responsiveness for a good to change in the price of another good
Consumer surplus
The difference between what the consumers are willing to pay and what they are actually paying
Complements
Goods that are jointly used with another
Command economy
An economy where all resources are publicly owned and state government will intervene to allocate scarce resources
Asymmetric information
Where one party is better informed than the other
Opportunity cost
The value of next best opportunity forgone
