Allocation of resources Flashcards
What is a microeconomic?
Microeconomic is the study of individual and business decisions.
What is Macroeconomic?
Macroeconomic looks at the decision of countries and government
What is a market system?
A market system is where resources are allocated through the demand and supply
What is a trade union?
An organizations that represents the interest of workers
What is a market economy?
A market economy also known as a free enterprise economy, is one in which consumers determine what is produced. In a market economy those who who earn the highest incomes exercises the maximum influence on what is produced.
Economic decisions are made by individuals and firms. There is no government involvement.
What are the features of a market economy?
Private property, Freedom of choice, Motivation of self interest, competition, limited government.
What is public goods?
Public goods are commodities or services that benefit all members of society, and which are often provided for free through public taxation
What is Merit goods?
Merit goods are goods that which create a positive effect the community is ought to be consumed more.E.g Hospitals and Schools
What is external cost?
External cost are the negative impacts on society (third-parties) due to production or consumption of goods and services. Example: the pollution from a factory.
What is external benefits?
External benefits are the positive impacts on society due to production or consumption of goods and services. Example: better roads in a neighborhood due to the opening of a new business.
What is Private cost?
Private costs are the costs to the producer and consumer due to production and consumption respectively. Example: the cost of production.
What is Private benefits?
Private benefits are the benefits to the producer or consumer due to production and consumption respectively. Example: the better immunity received by a consumer when he receives a vaccine.
How to workout social costs?
Social Costs = External costs + Private Costs
How to workout social benefits?
Social Benefits = External benefits + Private benefits
What is resource allocation?
Resource allocation: the way in which economies decide what goods and services to provide, how to produce them and who to produce them for.
What are the three questions?(Basic economic question)
what to produce, how to produce, and for whom to produce
What is a market?
A place where buyers and sellers come together to exchange goods/services.
What is demand?
Demand is the want and willingness of consumers to buy a good or services at a given price. Effective demand is where the willingness to buy is backed by the ability to pay. For example, when you want a laptop but you don’t have the money, it is called demand.
Private sector?
Private Sector: Firms which are owned by private individuals
Public sector?
Public Sector: Firms which are owned by the government.
Command Economies?
Command Economies are those where all of the firms within an economy are owned and operated by the government (state). There is no private sector and the government makes all of the pricing decisions.
Mixed Economies?
Mixed Economies have elements of both of these. Mostly the pricing decisions are made by the firms in the market and the relationship between supply and demand. However, the government can intervene and change the prices or provide goods and services that are not offered by the private sector
Effective demand?
Effective Demand: Where the consumer’s desire to consume a good or service is matched by their ability to pay for it.
What causes a shift in demand?
- A change in the consumer’s income
- The price of other goods
- Population changes
- Changes in fashion
- Changes in legislation
- Advertising and marketing
