Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Economics Theme 1 > Definitions > Flashcards

Definitions Flashcards

(89 cards)

Start Studying
1
Q

Ad valorem tax

A

A sales tax that is set a percentage of the price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Adverse selection

A

A situation in which a person at risk is more likely to take out insurance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Allocative efficiency

A

Achieved when society is producing an appropriate bundle of goods relative to consumer preferences

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Asymmetric information

A

A situation in which some participants in a market have better information about market conditions than others

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Bounded rationality

A

A situation in which peoples ability to take rational decisions is limited by a lack of information that is available, perhaps because of weakness at computation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Capital goods

A

Goods used as part of the production process, such as machinery or factories

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Cartel

A

An agreement between firms in a market on price and output with intention of maximising their joint profits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Ceteris paribus

A

Latin phrase meaning ‘other things being equal’; it is used when focusing on changes in one variable wile holding other influences constant

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Command economy

A

An economy in which decisions on resource allocation are guided by state

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Competitive market

A

A market in which individual firms cannot influence the price of the goods or service they are selling, because of competition from other firms

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Complements

A

Two goods are said to be complements if an increase in the price of one good causes the demand for the other good to fall

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Consumer goods

A

Goods produced for present use (consumption)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Consumer surplus

A

The value that consumers gain from consuming a good or service over and above the price paid

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Consumption externality

A

An externality that affects the consumption side of a market, which may be either positive or negative

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Cross elasticity of demand (XED)

A

A measure of the sensitivity of quantity demanded of a good or service to a change in the price of another good or service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Demand

A

The quantity of a good or service that consumers are willing and able to buy at any given price in a given period of time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Diminishing marginal utility

A

Describes the situation where an individual gains less additional utility from consuming a product, the more of it is consumed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Division of labour

A

A process whereby the production procedure is broken down into a sequence of stages, and workers are assigned to a particular stage

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Elastic

A

A term used when the price elasticity of demand is greater than 1 but less than infinity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Elasticity

A

A measure of the sensitivity of one variable to changes in another variable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

External benefit

A

The benefit that society receives over and above those that accure to the individual engaged in an economic activity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Externality

A

A cost or a benefit that is external to a market transaction, and is thus not reflected in market prices, which may effect third parties not involved in the transaction

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Factors of production

A

Resources used in the production process; inputs into production, particularly including labour, capital, land and enterprise

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Firm

A

An organisation that brings together factors of production in order to produce output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Free market economy
An economy in which market forces are allowed to guide the allocation of resources
26
Free-rider Problem
When an individual cannot be excluded from consuming a good, and thus has no incentive to pay for it’s provision
27
Government failure
A misallocation of resources arising from government intervention to correct a market failure that causes a less efficient allocation of resources and imposes a welfare loss on society
28
Gross domestic product (GDP)
A measure of the economic activity carried out in an economy over a period of time
29
Habitual behaviour
When consumers persist in acting in a particular way even when conditions have changed
30
Herding
Where people take decisions based on the actions of others, rather than on a rational evaluation of the situation that they face
31
Incidence of a tax
The way in which the burden of paying a sales tax is divided between buyers and sellers
32
Income elasticity of demand (YED)
A measure of the sensitivity of quantity demanded to a change in consumer incomes
33
Indirect tax
A tax levied on expenditure on goods and services (As opposed to a direct tax which is charged directly to an individual based on a component of income)
34
Inelastic
A term used the price elasticity of demand is less than 1 but greater than zero
35
Inferior goods
Where the quantity demanded decreases in response to an increase in consumer incomes
36
Internalising an externality
An attempt to deal with an externality by bringing an external cost or benefit into the price system
37
Law of demand
A law that states that there is an inverse relationship between quantity demanded and the price of a good or service, ceteris paribus
38
Luxury goods
Which the income elasticity of demand is positive, and greater than 1, such that as income rises, consumers spend proportionately more on the good
39
Macroeconomics
The study if the interrelationships between economic variables at ab aggregate level
40
Marginal analysis
An approach to economic decision making based on considering the additional benefits and costs of a change in behaviour
41
Marginal cost
The cost of producing an additional unit of output
42
Marginal social benefit (MSB)
The additional benefit that society gains from consuming an extra unit of good
43
Marginal social cost
The cost to society of producing an extra unit of a good
44
Market
A set or arrangements that allow transactions to take place
45
Market-based policy
An approach to tackling market failure by using the market mechanism
46
Market equilibrium
A situation that occurs in a market when the price is such that the quantity demanded by consumers is exactly balanced by the quantity supplied by firms
47
Market failure
A situation in which the free market equilibrium does not lead to a socially optimal allocation of resources, such that too much or too little of a good is being produced and/or consumed
48
Microeconomics
The study of of economic decisions taken by individual economic agents, including households and firms
49
Mixed economy
An economy in which resources are allocated partly though price signals and partly on the basis of intervention by the state
50
Model
A simplified representation of reality used to provide insight into economic decisions and events
51
Moral hazard
A situation in which a person who has taken out insurance is prone to taking more risk
52
Necessity
A good for which the income elasticity of demand is positive, and less than 1, such that as income rises, consumers spend proportionately less on the good
53
NIMBY (not in my back yard)
A syndrome under which people are happy to support the construction of an unsightly or unsocial facility, so long as it is not in their back yard
54
Non-excludability
A situation in which it is not possible to provide a product to one person without allowing others to consume it as well
55
Non-renewable resources
Natural resources that once used cannot be replenished, such as coal or oil
56
Non-rivaly
A situation in which one person’s consumption of a good does not prevent others from consuming it as well
57
Normal good
One where the quantity demanded increases in response to an increase in consumer incomes
58
Normative statement
A statement that involves a value judgement about what ought to be
59
Nudge theory
Analysis that suggests that peoples behaviour can be influenced by making desirable decisions easy to make
60
Opportunity cost
In decision-making, the value of the next best alternative forgone
61
Perfectly elastic supply
A situation in which firms will supply any quantity of a good at the going price: elasticity of supply is infinite
62
Perfectly inelastic supply
A situation in which firms can supply only a fixed quantity, so cannot increase or decrease the amount available: elasticity of supply is zero
63
‘Polluter pays’ principle
An argument that a firm causing pollution should be charged the full external cost that they inflict on society
64
Positive statement
A statement about what is
65
Potential economic growth
An expansion in the productive capacity of the economy
66
Price elasticity of demand (PED)
A measure of the sensitivity of quantity demanded to a change in the price of a good or service
67
Price elasticity of supply (PES)
A measure of the sensitivity of quantity supplied of a good or service to a change in the price of that good or service
68
Price mechanism
A process by which resource allocation is influenced through rationing, incentives and signalling
69
Price signal
Where the price of a good carries information to producers or consumers that guides the market towards equilibrium and assist in resource allocation
70
Private benefit
The benefit from an individual’s economic activity that accrue to that individual
71
Private cost
A cost incurred by an individual as part of its production or other economic activity
72
Private good
A good that, once consumed by one person, cannot be consumed by somebody else; such a good has excludability and is ribalrous
73
Producer surplus
The difference between the price received by firms for a good or service and the price as which they would have been prepared to supply that good or service
74
Production externality
An externality that affects the production side of a market, which may be either be positive or negative
75
Production possibility frontier (PPF)
A curve showing the maximum combinations of goods or services that can be produced in a given period with available resources
76
Prohibition
An attempt to prevent the consumption of a good by declaring it illegal
77
Public good
A good that is non-exclusive and non-rivalrous in consumption - consumers cannot be excluded from consuming the good, and consumption by one person does not affect the amount of the good available for others to consume
78
Regulation
Intervention to tackle market failure by direct action to command and control behaviour
79
Renewable resources
Natural resources that can be replenished, such as forests that can be replanted, or solar energy that does not get used up
80
Scarcity
A situation that arises when people have unlimited wants in the face of limited resources
81
Social benefit
The sum of private benefits and external benefits
82
Social cost
The sum of private and external costs
83
Specific tax
A slaws tac that is set at a constant amount per unit of sales
84
Subsidy
A grant given by the government to producers to encourage production of a good or service
85
Substitutes
Two goods are said to be substitutes if the demand for one food is likely to rise if the price of the other good rises
86
Supply
The quantity of a good or service that producers are willing and able to sell at any given period of time
87
Trade-able pollution permit system
A system for controlling pollution based on a market for permits that allow firms to pollute up to a limit
88
Unitary elastic
A term used when the price elasticity of demand is equal to 1
89
Value judgement
A statement based on your opinion or beliefs, rather than on facts

Economics Theme 1 (22 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions