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economics year 1 > key terms > Flashcards

key terms Flashcards

1
Q

define ceteris paribus

A

this means all other factors remain equal

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2
Q

what is the basic economic problem

A

there are limited resources but unlimited wants

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3
Q

define economic goods

A

these goods are limited and therefore have an opportunity cost

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4
Q

define free goods

A

these are goods that are unlimited so cannot be sold, eg air

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5
Q

define scares resources

A

these are a limited amount of these resources so decisions have to be made about how they are used

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6
Q

define non renewable resources

A

these are resources with a finite quantity, there supply is fixed and cannot be replenished

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7
Q

define renewable resources

A

these are resources that can have an infinite supply as they can be replenished

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8
Q

define sustainable development

A

this is development that doesn’t cause the renewable resources to be depleted

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9
Q

state the factors of production

A

land, labour, capital and enterprise

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10
Q

define the production possibility frontier

A

this is the most an economy can output if all of the factors of production are in use

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11
Q

define the opportunity cost

A

this is the value of the next best alternative

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12
Q

define a positive statement

A

this is a statement with a definitive true or false answer

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13
Q

define a normative statement

A

this is a statement that doesn’t have a definitive answer but is instead subject to interpretation

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14
Q

define economic growth

A

this is when the economies real GDP increases

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15
Q

what is specialisation

A

this is when an individual, company or economy focuses on the production of a few goods or services

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16
Q

define the division of labour

A

this is when groups of people are assigned to different parts of a manufacturing process

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17
Q

define a market

A

a market is where consumers and suppliers come into contact to exchange goods and services

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18
Q

what is a free market economy

A

this is an economy where the allocation of resources is determined by the market

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19
Q

what is a planned economy

A

this is an economy where the allocation of resources is determined by the government

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20
Q

what is a mixed economy

A

this is where the allocation of resources is determined by the markets and the government

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21
Q

define money

A

money acts as a medium of exchange, or a measure of value for a good or service

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22
Q

what is a substitute

A

this is an alternate good that the consumer can buy.

opposing goods

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23
Q

what is a complimentary good

A

this is when a goods increase in demand will lead indirectly to an increase in demand for another good

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24
Q

define price elasticity of demand

A

this is the measure of how sensitive the demand of a product is when compared to a price change =
% change in quantity demanded / % change of price

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25
Q

define the price elasticity of supply

A

this is the measure of how sensitive the quantity supplied is to the change in price
= % change in quantity supplied / % change in price

26
Q

what is income elasticity of demand (YED)

A

measure of how responsive the demand is to a change in average income
% change in QD / % average income

27
Q

what is XED

A

this is how the price change of one good affects the demand of another good
% QD of good B / % change in price of good A
if answer is positive then the goods are substitutes
if answer is negative the goods are compliments
if answer = 0

28
Q

define - luxury good

  • normal good

- inferior good

A

luxury good = as income rises consumers spend proportionally more on these goods YED > 1

normal good = as income rises demand for this good rises

inferior good = as incomes rise the demand for these goods fall

29
Q

define the term ‘short run’

A

this is a period of time where the factors of production are fixed

30
Q

define the term long run

A

this is a period of time where the factors of labour are variable

31
Q

define direct tax and indirect tax

A

a direct tax is a tax imposed onto people

these are taxes imposed on producers, and unlike direct taxes they are imposed on the products that they produce. consumers indirectly pay this tax

32
Q

what is a specific tax

A

this is a fixed amount of money added onto a product no matter the price

33
Q

what is an ad valorem tax

A

this is a tax that is a percentage of the original price added on
taxed good = original price + 20% of original price

34
Q

define a subsidy

A

this is grant provided by the government to encourage development in that area

35
Q

what is the market equilibrium

A

quantity supplied = quantity demanded

36
Q

define capitalism

A

this is an economy that allows private ownership of resources and businesses are allowed to obtain there own personal goals

37
Q

what is consumer surplus

A

this is the difference between the price consumers are willing to pay compared with the market price

38
Q

what is producer surplus

A

this is the difference between the price the produce is willing to supply the good at compared with the actual market price

39
Q

state the functions of price

A
  • acts as a signal to where resources should be allocated
  • to ration limited resources
  • attracts businesses and investors to profitable products
40
Q

what is meant by the barriers to entry

A

this refers to how easy it is for a firm to get into a new market.
some markets have higher barriers to entry eg. space ship building

41
Q

define economics of scale

A

this is when an increase in output causes a reduced cost per unit

42
Q

what is a rational consumer

A

a consumer that weighs up the benefits and cost of buying the product.
economics assumes all consumers are rational

43
Q

what is total utility

A

the total satisfaction felt by a consumer after consuming all the units within a given time period

44
Q

what is the marginal utility

A

this is the satisfaction felt by the consumer after consuming one more of the unit

45
Q

what is meant by diminishing utility

A

this is the idea the idea that for every extra unit consumed the marginal utility decreases

46
Q

what is behavioral economics

A

a branch of economics that studies the physiological and social factors that effect consumers decisions

47
Q

what is market failure

A

this is when there is inefficient allocation of resources

48
Q

what is an externality

A

this is third party affect cause by production or consumption of a product that isn’t represented in the price of the good

49
Q

what is a positive externality

A

this is when the social benefit is greater than the private benefit

50
Q

what is a negative externality

A

this is when a third party is negatively affected as a result of production or consumption of a product

51
Q

what is private cost

A

this is the cost felt by the producers or the consumer of the product

52
Q

what is the social cost

A

social cost = private cost + external cost

this is the total cost to society

53
Q

what is a public good

A

this is a good that is non-excludable, non-rivalrous and are non-rejectable

54
Q

what is the free rider problem

A

if a public good is non-excludable then that means people that didn’t contribute to the creation of the product can use it for free

55
Q

what is a private good

A

a good that once consumed by one person cannot be consumed by another person

56
Q

define asymmetric information

A

this is when there is a difference in knowledge between the producer and the consumer

57
Q

what is minimum price

A

this is a minimum price for a good set by the government

58
Q

what is a maximum price

A

this is a maximum price for a good set by the government

59
Q

what is government failure

A

this is when the government allocates resources inefficiently

60
Q

what is government intervention

A

this is when the government intervenes in a market to try and correct market failure

61
Q

what is state provision

A

these are services provided by the government such as the NHS

economics year 1 (2 decks)

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