Definitions Flashcards
1
Q
Social science?
A
The study of human society and social relationships.
2
Q
Ceteris Paribus?
A
Everything is equal.
3
Q
The Basic Economic problem?
A
The problem of how to make the best use of limited or scarce resources.
4
Q
Opportunity cost?
A
This measures the cost of a choice made in terms of the next best alternative.
5
Q
Factors of production?
A
The inputs available to supply goods and services in an economy.
6
Q
Land in factors of production?
A
Natural resources available for production.
7
Q
Labour in factors of production?
A
The human input in the production process.
8
Q
Enterprise?
A
Entrepreneurs organise factors of production and take risks.
9
Q
Capital?
A
Goods used in the supply of other products e.g tech.
10
Q
Positive statement?
A
Objective statements that are facts and can be accepted or rejected.
11
Q
Normative statement?
A
Subjective statement which is opinion-based and can’t be proved.
12
Q
Command economy?
A
An economy where the government decides the needs and wants of the people and the best way to produce it for everyone.
13
Q
Free market economy?
A
An economy that is dictated by how much consumers spend.
14
Q
Mixed economy?
A
An economy that has a mix of private and public ownership with a bit of government intervention.
15
Q
Capital goods?
A
Goods that are used to make other goods for a business e.g machinery and tools.
16
Q
Consumer goods?
A
Goods used by consumers and have no future productive use e.g food and clothing.
17
Q
Production possibility frontier (PPF)?
A
The curve showing alternative combinations of two goods or services attainable when all resources are fully and efficiently employed.
18
Q
Productive efficiency?
A
Producing at full efficiency given your resources at stake.
19
Q
Allocative efficiency?
A
The correct amount of goods that meet the needs and wants of society.
20
Q
Depreciation?
A
Reduction in value or the usefulness (productivity) of capital over time.
21
Q
Price mechanism - Allocate?
A
Allocating scarce resources among competing uses.
22
Q
Price mechanism - Rationing?
A
Prices serve to ration scarce resources when market demand outstrips supply?
23
Q
Price mechanism - Signalling?
A
Prices adjust to demonstrate where resources are required, and where they aren’t.
24
Q
Price mechanism - Incentives?
A
When the price for a product rises, quantity supplied increases as businesses respond.
25
Demand?
The quantity that purchasers are willing and able to buy at a given price in a given period of time.
26
Effective demand?
Only if demand for a product is backed up by a willingness and ability to pay the market price does demand become effective or actual.
27
The basic law of demand?
Where demand varies inversely with price.
28
P.A.S.I.F.I.C?
Population, Advertising, Substitute goods, Income, Fashion/Trends, Interest rates, Complementary goods.
29
Elastic goods?
Where there’s a large proportionate response in demand to a change in price.
30
Inelastic goods?
Where there’s a small proportionate response to a change in price.
31
Price Elasticity of Demand (PED)?
The responsiveness of quantity demanded to a change in price.
32
Income Elasticity of Demand (YED)?
The responsiveness of quantity demanded of a product or service to a change in income
33
Cross Price Elasticity of Demand (XED)?
The responsiveness of demand for one good to a change in price of another good.
34
Normal good?
A good that is used regularly and has a positive elasticity (0-1).
35
Inferior good?
A good that’s considered average compared to a normal good and one that has a negative elasticity (-1-0).
36
Luxury good?
Goods that superior to any other good and quite rare for consumers to own and one that is always income elastic (more than 1).
37
Substitute good?
A good that is an alternative to the main product and one that always has a positive correlation (+) between demand of an existing good and the price of a rival.
38
Complementary goods?
A good that is used with another good in order to add to its value and one that always has an inverse correlation between price of one good and quantity demanded of the other good.
39
Giffen good?
A low income, non-luxury that makes demand rise when the price rises and makes demand fall when the price falls. This technically goes against the law of demand since it’s curve is upward-sloping instead of downward sloping.
40
Supply?
The quantity of goods or services that producers are willing to sell at any price in a given period of time.
41
P.I.N.T.S W.C?
Productivity, Indirect taxes, Number of firms, Technology, Subsidies, Weather, Cost of production.
42
Joint supply?
Where the increase or decrease in one good leads to the increase or decrease of another good.
43
Price Elasticity of Supply (PES)?
Measures the relationship between change in quantity supplied and a change in price.
44
Consumer surplus?
The additional benefit consumers get from purchasing a good or service below the maximum price they’re prepared to purchase for.
45
Producer surplus?
The additional revenue (welfare) producers given from the market as a result of selling a product or service above the minimum price they’re willing to sell for.
46
Equilibrium price?
Where demand and supply meet.
47
Government intervention?
When governments try to intervene in markets to try and overcome market failure that’s caused by individuals, groups or firms and to try and improve economic efficiency.
48
Market failure?
A situation where goods and services are inefficiently distributed (unfairly distributed).
49
Price controls?
A way to regulate prices and set a price above or below the market/price equilibrium.
50
Government subsidies?
Any form of government support/intervention whether it’s financial, social or otherwise.
51
Indirect taxes?
A tax imposed by the government that increases the supply costs faced by producers.
52
Value-added tax (VAT)?
Any extra material or value that is added on to the original tax.
53
Moral hazard?
A lack of incentive to guard against risk where one is protected from its consequences.
54
Externalities?
A cost or benefit caused by a producer that’s not financially incurred or received by that producer. Externalities can be either positive and negative.
55
Equality of opportunity?
Everyone is treated similarly as they’re believed to be able to compete on equal terms.
56
Equality of outcome?
It’s an equal shot at empowerment or chance to develop an individual’s potential rather than equal goods/chances.
57
Positive externality/Merit goods?
Good such as education and health which are beneficial for the consumer.
58
Negative externality/De-merit goods?
Goods which do more harm than benefits to the consumer such as alcohol and smoking.
59
Socially optimum level of consumption?
This occurs where the benefit to the user of the last unit consumed is no more and no less than the total cost used by society.
60
Joint demand?
When demand for one product is positively related to market demand for a related good or service e.g the relationship between complementary goods.
61
Competing demand?
When there are products that have close substitutes and the consumer has to choose from them.
62
Composite demand?
When a good or service has more than one use so it leads to a fall in supply of another product as well as it’s own demand increasing.
63
Derived demand?
Demand for a good which is used in the production of other goods.
64
Joint supply?
Where the increase or decrease in supply leads to an increase or decrease in supply of a by-product.
65
Competing supply?
Alternative products that a firm can make with resources of land, labour, capital etc. In other words it’s a good that can be put to more than one use.
66
Excludability?
A good not everyone pays for, but enjoys nonetheless.
67
Rivals?
When someone using a good means somebody else can’t use it.
68
Private goods?
Goods that are both rivalrous and excludable.
69
Club goods?
Goods that are excludable but not rivalrous
70
Common goods?
Goods that are rivalrous but not excludable.
71
Public goods?
Goods that are both non-rivalrous and non-excludable.
72
Quasi/Semi-public goods?
Goods that have either one of excludability or rivalry
73
Free rider problem?
Where goods aren’t excludable and people who don’t pay for the good don’t get punished.
74
Property rights?
Rules and laws on what resources we own and who gets to use these resources in life
75
Forced rider problem?
People who are forced to pay and don’t reap benefits
76
Tragedy of the Commons?
Market failure that comes from over-exploitation of resources (those which no individual or country owns but anyone can use them)
77
Regulatory capture?
Where groups being regulated have too much influence over the regulators
78
Market structure?
A market that is defined by different levels of differentiation and characteristics.
79
Monopoly?
Firm with 100% power or a large majority of power (usually 25% market share).
80
Oligopoly?
Market dominated by a small number of large firms who all have monopoly power.
81
Monopolistic competition?
Lots of small firms with differentiated products.
82
Perfect competition?
Large number of small firms who produce differentiated products that make a perfectly elastic demand curve.
83
Dynamic efficiency?
Concerned with the firm’s productive efficiency over a period of time.
84
Formal collusion?
When firms make a formal agreement to stick to high prices, which can occasionally result in a cartel forming.
85
Tacit collusion?
When firms make informal agreements or collude without actually speaking to their rivals.
86
Price leadership?
The possible situation firms may try to unofficially collude by following prices set by a market leader.
87
Pay-off Matrix?
A table which determines the interdependence and uncertainty in the market.
88
Contestable markets theory?
Despite some markets having high barriers to entry, profits and the process of “creative destruction” will eventually lead to uncompetitive markets becoming more competitive.
89
Nationalisation?
When the government puts a major industry who used to be privately owned, under public/state ownership.
90
Private Limited Company?
Private company which has public shares for sale on the stock market.
91
Privatisation?
When the government puts a major public industry under private/government ownership.
92
Labour Market?
A market where the demand for Labour is determined by the Marginal Revenue Product (MRP) for Labour.
93
Positive income effect?
When higher wages cause people to want to work more hours to reach a targeted income.
94
Negative income effect?
When a target income has been reached and people prefer spending more time on leisure than earning more income.
95
Monopsony?
Firms who purchase all (or most) of the Factors of Production of a product or service. It occurs when there’s a sole or dominant employer in a labour market.
96
Trade Unions?
Organisations that represent the rights of workers.
97
Union density?
% of workforce who are in a trade union.
98
Union militant?
Workers in the union who have the willingness to take action.
