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Project Management Year 1 > Economics > Flashcards

Economics Flashcards

1
Q

Allocative Efficiency

A

Consumer valuation is equal to the economic cost. Occurs when Price=Marginal Cost. P>MC more should be produced. P

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2
Q

Productive Efficiency

A

Combination of capital and labour in the most effective way, minimising their ATC. Producing at an output that coincides with the lowest point of a firm

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3
Q

EOS Definition

A

The benefits to a firm of operating at an increased scale of production leading to reductions in average total cost.

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4
Q

X-Efficiency

A

The need to be able to control the costs of the firm.

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5
Q

Internal EofS

A

Economies of scale that arise within the firm as a result of growth, resulting in lower long run average costs. Moves AC down.

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6
Q

External EofS

A

Economies of scale that arise from the growth of an industry and benefits firms within the industry, resulting in lower long run average costs. Moves AC down

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7
Q

LDMR

A

As each unit of a variable factor is increased to a fixed factor, output increases at first, then it will decrease and become negative, due to the restraints of that factor.

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8
Q

Marginal Product

A

The change in total product from employing one more variable factor.

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9
Q

MRP

A

Change in a firms revenue from employing one more worker.

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10
Q

Pecuniary Factors

A

Wage rate and the opportunity of bonus’s and working overtime.

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11
Q

Lorenz Curve / Gini coefficient Definition

A

Illustrates the extent of income and wealth inequality in a society. Gini used to make international comparisons.

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12
Q

Lorenz Curve Explain

A

Percentage of income Y axis
Percentage of population X axis
Shows how far from being perfectly equal, not straight lower groups don’t earn as much. Governments can use progressive taxation and amount of benefits paid.

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13
Q

Circular Flow Definition

A

The flow of goods/services and income between producers/firms and households/consumers.

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14
Q

Leakages (Expenditure):

A

The outflow from the circular flow of income. Imports, taxation, savings.

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15
Q

Injections (Income):

A

When people spend money on goods/services money is put into the economy. Government spending, Exports, Investment. Expenditure of people into the economy.

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16
Q

Expenditure Method

A

C + I + G + ( X - M )

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17
Q

Cyclical Unemployment

A

Demand deficient - Less demand for firms products, labour isn’t required. Loss in growth of economy.

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18
Q

Structural Unemployment

A

Immobility of labour
Occupational - Loss of skills from the changing of industry
Geographical - Don’t move to find work

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19
Q

Aggregate Demand

A

Total spending on domestic output at a given time.

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20
Q

Automatic Stabilisers

A

Forms of government spending and taxation that dampen down the affects of fluctuations without government policy changes.

21
Q

Cost Push Inflation

A

Increases in the average price levels as a result of increases in the cost of production.

22
Q

Demand Pull Inflation

A

Increases in the average price level resulting from excessive increases in aggregate demand.

23
Q

Economic Growth

A

The growth in the value of output in the economy.

24
Q

Expansionary Monetary Policy

A

Changes in the money supply (increase), rate of interest (cut) and exchange rate (lower) which are designed to stimulate aggregate demand.

25
Q

Fiscal Drag

A

The reduction in disposable income that occurs when tax bands are not in line with inflation.

26
Q

Fiscal Policy

A

A governments policy in regards to taxation, public spending. It can be loose/expansionary or tight/deflationary.

27
Q

GDP

A

The total value of goods and services produced by a country based in an economy.

28
Q

Multiplier

A

An increase in the levels of injections in the circular flow of which increases aggregate demand.
1 / (1 – mpc(1 - t))

29
Q

Production Possibility curve

A

The allocation of resources between two products in production, given current resources and state of technology.

30
Q

Consumer Surplus

A

The difference between the price a consumer is willing and able to pay and the price that is required to make the purchase.

31
Q

PED

A

The responsiveness of quantity demanded given a change in price. % change in quantity / % change in price.

32
Q

Normal Good

A

Goods for which an increase in income leads to an increase in demand.

33
Q

Inferior Good

A

Goods for which an increase in income leads to a decrease in demand.

34
Q

YED

A

The responsiveness of demand given a change in income. % change in quantity / % change in income.

35
Q

XED

A

The repsonsiveness of quantity demanded of one good given a change in price of another. % change in demand for good 1 / % change in price of good 2.

36
Q

Producer Surplus

A

The difference in price a producer receives for a good / service and the actual price they are willing to accept for the good/service.

37
Q

Economic Problem

A

The need to make choices regarding the allocation of limited and finite resources amongst infinite and competing wants.

38
Q

Giffen Good

A

Higher price increases demand, increase in demand is due to the income effect of the higher price outweighing the substitution effect. Can’t buy other goods.

39
Q

Veblen Good

A

Demand rises as price rises, attribute it with quality

40
Q

Complementary Goods

A

Goods for there is joint demand.

41
Q

Substitute Good

A

Competing goods.

42
Q

Income Effect

A

Price change effects consumer income. If price rises, it cuts disposable income and lower demand.

43
Q

Substitution Effect

A

An increase in the price encourages consumers to buy alternative goods. Measures how much the higher price encourages use of other goods, assuming same income

44
Q

Philips Curve

A

Relationship between inflation and unemployment

Classical reject, Keynesian support

45
Q

Okuns Law

A

As unemployment increases production decreases

46
Q

Classical Economics

A

Long run aggregate supply curve is inelastic
Real GDP effected supply side, investment/productivity
Increase AD only cause inflation

47
Q

Laffer Curve

A

Determines optimal tax rate, until a point people willing to to pay a certain rate, after people seek to reduce tax liability or not work because money will go to governmen

48
Q

Reserve Ratio

A

The amount banks keep in liquid reserve i.e cash

1/RRR

Project Management Year 1 (13 decks)

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