Year 12 micro Flashcards
What is the main economic problem
- There are not enough resources to satisfy our consumption
What are the three main economic agents
- Consumers
- Producers
- Governments
What is the opportunity cost
- Next best alternative foregone
Advantages of specialisation
- More efficient
- Lowers long run average cost
- Reduces training cost
Disadvantages of specialisation
- Workers may struggle to adapt if the environment changes
- Workers may become bored and therefore less productive
4 uses of money
- Unit of account (comparable)
- Store of value
- Medium of exchange
- Standard of deferred payment
Elements of a mixed economy
- Gov forms public sector and firms form private sector
What is derived demand
- Derived demand is the demand for a factor of production used to produce another good or service
What is 1) joint demand y 2) positive demand
1) Complement goods - xped is negative
2) Composite demand happens when goods or services have more than one use so that an increase in the demand for one product leads to a fall in supply of the other
Utility
- Total utility is total level of satisfaction from given level of cons.
- Marginal is change in satisfaction from each extra unit
What is market equilibrium
- The price at which the market for the product clears
1) Consumer y 2)producer surplus
1) Area under demand curve and above market price
2) Area above supply curve and below price
PED
- Responsiveness of demand after a change in price
- %change in Qd/%change in price
- 0 = perfectly inelastic
- 0-1 = inelastic
- 1 = unit elastic
- > 1 = elastic
Factors affecting PED
- Habit
- Substitutes
- Cost of switching
- Price in relation to income
YED and types of goods
- %change in Qd/%change in real income
- Normal goods - positive income elasticity
- Luxury goods - income elasticity >1
- Necessities - 0-1
- Inferior goods - negative income elasticity