Definitions Flashcards
(103 cards)
1
Q
LABOUR
A
Mental or physical effort of humans rewarded by wages
2
Q
CAPITAL
A
Anything that is man made & helps production rewarded by interest
3
Q
LAND
A
All natural resources used in production
4
Q
ENTERPRISE
A
A person who combines other 3 factors of production, makes business decisions, bears the risk & is rewarded by profit
5
Q
ECONOMIC PROBLEM
A
Wants are unlimited, but resources are limited
6
Q
OPPORTUNITY COST
A
Next best alternative given up when making a choice
7
Q
PRODUCTION POSSIBILITY CURVE
A
Shows max output of 2 goods that can be produced when resources are fully and efficiently used
8
Q
PRIVATE COST
A
Cost paid my producers or consumers of a product
9
Q
EXTERNAL COST
A
Damage to a 3rd party that is not taken into account
10
Q
SOCIAL COST
A
Private+External cost
Cost paid by whole society
11
Q
PRIVATE BENEFITS
A
Benefits or gains to producers and consumers
12
Q
EXTERNAL BENEFIT
A
Benefit to a 3rd party not taken into account by producer
13
Q
DEMAND
A
Willingness and ability to buy a product
14
Q
SUPPLY
A
Willingness and ability to sell a product
15
Q
EQUILIBRIUM PRICE
A
Price where quantity demanded equal quantity supplied
No excess demand or supply
16
Q
DISEQUILIBRIUM PRICE
A
Price where quantity demanded is NOT equal to quantity supplied
Results In surplus(excess supply)
OR shortage(excess demand)
17
Q
PRICE ELASTICITY OF DEMAND
A
Responsiveness of quantity demanded to changes in price
18
Q
INELASTIC DEMAND
A
A price change causes a smaller % change in quantity demanded
19
Q
ELASTIC DEMAND
A
A price change that causes a larger % change in quantity demanded
20
Q
PRICE ELASTICITY OF SUPPLY
A
Responsiveness of quantity supplied to changes in price
21
Q
INELASTIC SUPPLY
A
When price changes by a certain %, quantity supplied will change by a smaller %
22
Q
ELASTIC SUPPLY
A
When price changes by a certain %, quantity supplied will change by a larger %
23
Q
REGULATIONS
A
Rules and laws imposed by government
24
Q
SUBSIDY
A
Payment made by the government to firms to help reduce their costs of production and increase output level and decrease prices
25
TRADE UNION
An organization of workers that negotiates for better pay and safer working conditions for its members
26
SOLE TRADER
A business owned and controlled by one person
| He/she has unlimited liability and gets all the profit
27
UNLIMITED LIABILITY
Owners must repay all business debts using their savings or selling their property
28
PUBLIC LIMITED COMPANY
A type of business that sells shares to the general public in the stock market
Raising high finance to expand
29
LIMITED LIABILITY
Owners are not responsible for business debts, if the business fails they lose funds invested into the business
30
COOPERATIVES
Is a type of business owned and controlled by its members for their mutual benefit, it has limited liability & each member has one vote
31
MULTINATIONAL COMPANY
Is a firm that operates in more than one country & its head office is in the country of origin
32
PRODUCTIVITY
Is output per input per unit of time
| It’s a measure of efficiency for factors of production
33
LABOUR PRODUCTIVITY
Is output per worker per unit of time
| Higher productivity reduces cost of production
34
FIXED COSTS
Cost is that don’t change with output
35
VARIABLE COST
Costs that change directly to output level
36
AVERAGE COST
Cost per unit= TC/output
37
REVENUE
Is income generated from sales=P x q
38
PROFIT MAXMIZATION
Means to achieve highest possible profit by increasing total revenue and decreasing total cost
39
BREAK-EVEN POINT
Output level where total revenue equals total cost
| Zero profit
40
HORIZONTAL INTEGRATION
Occurs when 2 or more firms at the same stage of production combine together either by merger or takeover
41
VERTICAL INTEGRATION
Occurs when 2 or more firms at different stages of production merge together
Can be vertical backward > when a firm merges with previous stage(source of supply)
Can be vertical forward > when a firm merged with next stage (shop)
42
DIVERSIFICATION
“Conglomerate integration”
| Occurs when 2 or more firms in unrelated industries merge to spread the risk of loss
43
ECONOMIES OF SCALE
Reduction of average cost of firm as output increases
44
DISECONOMIES OF SCALE
An increase In Average cost of a firm as output increases beyond a certain level
45
EXTERNAL ECONOMIES OF SCALE
When a firm locates where other firms in the same industry are located so decreasing its cost of production
46
COMPETITION
Is a market structure where a large number of producers, that sell homogeneous products
47
PRICE TAKERS
Occurs in perfect competition, where firms take the price determined by demand & supply
No one firm has the power to affect market price
48
MONOPOLY
Occurs when 1 firm dominates the market, it can restrict output to increase the price( price maker )
49
PRICE MAKER
Occurs in monopoly where it can restrict the market supply, to change higher price for its product
50
FULL EMPLOYMENT
One of the government macroeconomic aims
Means to reduce unemployment to the lowest possible level
Keeping it to seasonal or frictional unemployment
51
REDISTRIBUTION OF INCOME
Means to reduce the gap between higher and lower income groups, using progressive tax & using tax revenue to subsidie basic necessities for the poor
52
FISCAL POLICY
A policy that uses tax & government expenditure to influence economic activity and achieve macroeconomic aims
53
MONETARY POLICY
A policy that uses interest rate, exchange rate or money supply to achieve macroeconomic aims
54
SUPPLY SIDE POLICY
Is a long term policy aimed at increasing the productive capacity of a country by improving quality and quantity of factors of production
55
TAX
Is a government levy on income or expenditure
56
DIRECT TAX
Is a tax Imposed on income, wealth or profit of individuals or firms. The burden of tax can’t be shifted to someone else
Eg: Income tax , Corporation tax
57
INDIRECT TAX
Tax imposed on expenditure on goods or services.
Burden of tax can be shifted to customer in the form of higher prices
Eg: VAT, tariff
58
PROGRESSIVE TAX
As income increases tax rate (% )increases
59
PROPORTIONAL TAX
Tax rate is same for all income levels
60
REGRESSIVE TAX
Low income groups pay higher rate of tax
| eg: sales tax
61
BARTER
The act of exchanging goods for other goods or services
62
MEDIUM OF EXCHANGE
Money is widely accepted as a means of payment for goods or services
63
MEASURE OF VALUE
Money is a unit of account used to measure the market value of goods or services
64
STORE OF VALUE
Money can be saved and used at a later date
65
STANDARD FOR DEFERRED PAYMENT
Buy the product now and pay at a later date
| (I.e) money is a standard for future payment of loans
66
CENTRAL BANK
Monetary authority that manages a country’s money supply and banking system
67
STOCK MARKET
Is an institutional market for trading shares of public limited countries
68
INFLATION
Sustained rise in general price levels in an economy over time
69
DEFLATION
Sustained decrease in general price levels in an economy over time
70
UNEMPLOYMENT
People who are able to and willing to work, but can’t find a job
71
GDP
(Gross domestic product)
| Money value of goods and services produced within a country for a given period of time( usually a year)
72
REAL GDP
Measures actual amount of goods and services produced within a country after excluding effect of inflation
73
ECONOMIC GROWTH
- An increase in a countries real GDP over a given period of time
- Measured by rate of change in real GDP
- Increase in productive capacity of an economy and shown by an outward shift in production productivity curve
74
RECESSION
A fall in a countries GDP over 2 consecutive quarters
75
GDP PER CAPITA( or per head)
Total output divided by population can be used as a measure for standard of living
76
ABSOLUTE POVERTY
Exists when people lack income to buy basic necessities (food, clothes, shelter, etc.)
Calculated by the % of the population living below poverty line($1.9)a day
77
RELATIVE POVERTY
Comparative measure, means individuals have lower standard of living in comparison with average member of society
78
BIRTH RATE
Number of births per thousand population per year
79
DEATH RATE
Number of deaths per thousand population per year
80
FERTILITY RATE
Measures average number of children born per woman
81
LIFE EXPECTANCY
Measures number of years an average person is expected to live
82
DEPENDENCY RATIO
Measures the dependent population as a portion of work force
83
UNDER POPULATED
The size of the population is less than the available resources. GDP per head can increase if population increases
84
OVER POPULATION
The size of the population is more than the available resources. Any increase in the size of population leads to a fall in GDP per head
85
SPECIALIZATION
Occurs when an individual, firm, region or country concentrate on a particular good point or service
86
FREE TRADE
Trade without any form of trade barriers as tariff or quota
87
TRADE PROTECTION
Refers to the use of trade barriers as tariffs or quotas to restrict imparts
88
TARIFFS
A Tax imposed on imparts
89
QUOTAS
An upper limit on the amount of imparts allowed inside a country
90
EXCHANGE CONTROL
Means making foreign currency unavailable to domestic consumers and firms, so they are unable to buy goods or services
91
EMBARGO
Banning trade within a certain country
92
BALANCE OF PAYMENT
Is a financial record of a country’s transactions with the rest of the world in a year
93
CURRENT ACCOUNT
Part of the balance of payments the include:
- Visible balance( trade in goods)
- Invisible balance(export and import of services)
- Net income flow(includes inflow, outflow of profit, dividend and interest)
- Current transfers(includes taxes and foreign aid)
94
CURRENT ACCOUNT DEFICIT
Occurs when all debt items exceed all credit items in visible & invisible balance, net income flow and current transfers
95
CURRENT ACCOUNT SURPLUS
Occurs when all credit items exceed all debit items in visible & invisible balance, net income flow, current transfers
96
EXCHANGE RATE
Is the value of a country’s currency in terms of other countries
97
FLOATING EXCHANGE RATE
Means the exchange rate is allowed to fluctuate according to forces of demand and supply without government interference
98
FIXED EXCHANGE RATE
The exchange rate is not allowed to change according to forces of demand and supply but it is set by the government at a certain value
99
APPRECIATION
A rise in a country’s currency in terms of other countries in a floating exchange rate
100
DEPRECIATION
A fall in a country’s currency in terms of other countries in a floating exchange rate
101
DEVALUATION
Is when the price of currency is officially decreased in a fixed exchange rate this is done by the government buying foreign currency and selling domestic currency
102
REVALUATION
Is an official increase in the price in a currency in a fixed exchange rate This is done by the government by buying domestic currency and selling foreign currency to its citizens using foreign reserves in the central bank
103
INVESTMENT
sp on capital
