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ECONOMICS MICRO OCR DEFINITIONS > Definitions > Flashcards

Definitions Flashcards

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1
Q

What is the allocation of resources?

A

How scarce resources are distributed among producers and how scarce goods are allocated among consumers

concept addresses the economic problem of scarcity and how it affects production and consumption decions.This concept addresses the economic problem of scarcityand how it affects production and consumption decions.This concept addresses the economic problem of scarcity and how it affects production and consumption decions.This concept addresses the economic problem of scarcity and how it affects production and consumption decions.

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2
Q

Define average cost (AC).

A

Total costs divided by total output. Unit cost of production

Average cost is a critical concept in understanding the efficiency of production.

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3
Q

What is average revenue?

A

Total revenue divided by total output. Revenue per unit sold

Average revenue is important for firms to assess their pricing strategies.

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4
Q

What is borrowing?

A

To receive money from another party with the agreement that the money will be repaid

Borrowing is a fundamental concept in finance and economics.

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5
Q

What are building societies?

A

A mutual financial institution owned by its members, primarily to receive deposits and lend money to purchase property

Building societies play a significant role in the housing market.

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6
Q

Define capital in economic terms.

A

The human-made aids to production

Capital includes tools, machinery, and buildings used in the production process.

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7
Q

What is the role of a central bank?

A

To issue a country’s banknotes, act as a lender of last resort for other banks, and implement monetary policy

Central banks are crucial in managing a country’s currency and monetary stability.

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8
Q

What is a commercial (retail) bank?

A

A bank that takes deposits from customers and turns them into assets for the bank

Commercial banks provide various financial services to individuals and businesses.

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9
Q

What is competition in a market?

A

Where different firms in a market are trying to sell similar products to consumers

Competition affects pricing, quality, and innovation in the market.

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10
Q

Define a competitive market.

A

A market in which there are a large number of small firms where price and quantity are set by market forces

Competitive markets are characterized by the free entry and exit of firms.

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11
Q

Who is a consumer?

A

A person or organization that directly uses a good or service

Consumers influence market demand and pricing.

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12
Q

What is demand?

A

The willingness and ability to purchase a good or service at a given price over a given time period

Understanding demand is essential for businesses to meet consumer needs.

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13
Q

What is demand for labour?

A

Derived demand for labour due to demand for the good or service the labour produces

An example is the demand for construction workers when there is a demand for building work.

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14
Q

How is price determined?

A

Through the interaction of the free market forces of demand and supply

This interaction establishes the general level of price for a good or service.

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15
Q

What determines wages?

A

The interaction of supply of labour and demand for labour

Wages are influenced by various factors, including skill level and market conditions.

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16
Q

What is the division of labour?

A

Where workers concentrate on one area of the production process

This concept allows for increased efficiency and specialization in production.

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17
Q

What does economic choice refer to?

A

An option for the use of scarce resources

This involves making decisions on how to allocate limited resources effectively.

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18
Q

What is the economic problem?

A

How best to use scarce resources in order to satisfy unlimited wants of people

This highlights the conflict between limited resources and unlimited human desires.

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19
Q

Define economic sustainability.

A

The best use of scarce resources to promote development or growth for a country, firm or individual, now and in the future

It emphasizes long-term viability and resource management.

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20
Q

What are economies of scale?

A

The cost advantages a firm can gain by increasing the scale of production, leading to a fall in long run average costs

This concept is crucial for larger firms to reduce per-unit costs.

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21
Q

What does efficiency refer to in economics?

A

The optimal production and distribution of scarce resources

Efficiency ensures that resources are used in the most productive way.

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22
Q

What is elastic demand?

A

When the percentage change in quantity demanded is greater than the percentage change in price

This indicates consumers are sensitive to price changes.

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23
Q

What is elastic supply?

A

When the percentage change in quantity supplied is greater than the percentage change in price

This indicates producers are responsive to price changes.

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24
Q

Who is referred to as enterprise in economics?

A

The individual that takes a risk in organizing the other three factors of production

This includes land, labor, and capital.

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25
Define environmental sustainability.
When the impact of growth or development on the natural world is small and manageable now and in the future ## Footnote It focuses on balancing economic growth with ecological health.
26
What are equilibrium price and quantity?
Where the quantity supplied exactly matches the quantity demanded ## Footnote This is a key concept in market economics.
27
What does exchange mean in economics?
Giving up of something you have in return for something you do not have, but wish to have ## Footnote This is fundamental to trade and economic interactions.
28
What is a factor market?
Where the services of the factors of production are sold ## Footnote This includes labor markets and capital markets.
29
What is the financial sector?
Firms that provide financial services ## Footnote This includes banks, investment firms, and insurance companies.
30
Define good in economics.
A tangible product, i.e. a product that can be seen or touched ## Footnote Goods contrast with services, which are intangible.
31
What are goods?
Physical products/tangible ## Footnote They can be categorized into consumer goods and capital goods.
32
Who is the government in an economic context?
A political authority that decides how a country is run and manages its operation ## Footnote Governments play a crucial role in regulating economic activity.
33
What is gross pay?
Earnings before any deductions are taken ## Footnote This is the total income before taxes and other deductions
34
What is income tax?
A direct tax levied on income ## Footnote Income tax is typically imposed by governments on individuals and businesses based on their income levels.
35
Define individual demand.
The demand for a good/service by an individual consumer ## Footnote Individual demand reflects the specific needs and preferences of a single consumer.
36
What is individual supply?
The supply of a good/service by an individual producer ## Footnote Individual supply represents the quantity that a specific producer is willing to sell at various prices.
37
What characterizes inelastic demand?
When the percentage change in quantity demanded is less than the percentage change in price ## Footnote This means consumers are less responsive to price changes.
38
Define inelastic supply.
When the percentage change in quantity supplied is less than the percentage change in price ## Footnote Inelastic supply indicates that producers are less responsive to price changes.
39
What is an insurance company?
A financial institution that guarantees compensation for specified loss, damage, illness or death in return for a premium ## Footnote Insurance companies provide risk management and financial protection services.
40
What does interdependence mean in economics?
Each economic group responds to the actions of others ## Footnote This reflects the interconnected nature of different sectors within an economy.
41
What are interest rates?
The cost for borrowing and the reward for saving ## Footnote Interest rates influence consumer behavior and investment decisions.
42
Define investment in economic terms.
The purchase of capital goods that are used to produce future goods and services ## Footnote Investment is critical for economic growth and development.
43
What is the labour market?
Workers sell their labour and firms buy their labour ## Footnote The labour market is where the supply of labour meets the demand for labour.
44
What is labour?
The workforce of an economy in terms of both the physical and mental effort involved in production ## Footnote Labour is a key factor of production alongside land and capital.
45
Define land in economic terms.
Natural resources, such as farmland and mineral deposits ## Footnote Land is considered a primary factor of production.
46
What is the law of demand?
For most products, the quantity demanded varies inversely with its price ## Footnote This principle indicates that as prices rise, demand typically falls.
47
What is the law of supply?
For most products, the quantity supplied varies directly with its price ## Footnote This means that higher prices typically lead to an increase in the quantity supplied.
48
What does loss mean in economic terms?
When total revenue is less than total cost ## Footnote Loss is an important concept for businesses as it impacts profitability.
49
What is a market?
Any way of bringing together buyers and sellers to buy or sell goods and services ## Footnote Markets can be physical or virtual platforms.
50
Define market demand.
The total demand for a good or service found by adding together all individual demands ## Footnote Market demand provides insight into overall consumer interest in a product.
51
What is a market economy?
Where the forces of demand and supply determine the allocation of resources ## Footnote In a market economy, decisions are driven by consumer preferences and competition.
52
What are market forces?
Factors that determine price levels of the availability of goods and services in an economy without government intervention ## Footnote Market forces include supply and demand dynamics.
53
What is market supply?
The total supply of a good or service found by adding together all individual supplies ## Footnote Market supply reflects the overall availability of a product in the market.
54
Define medium of exchange.
Anything that sets the standard of value of exchange of goods and services that is acceptable to all parties in a transaction ## Footnote A medium of exchange facilitates trade by eliminating the need for bartering.
55
What is money?
Anything that is generally accepted as a means of payment for goods and services ## Footnote Money serves as a unit of account, a store of value, and a medium of exchange.
56
What is a monopoly?
A sole seller or producer in a market ## Footnote A monopoly can lead to higher prices and reduced consumer choice.
57
What characterizes an oligopoly?
A small number of firms control the majority of market share ## Footnote Oligopolies can lead to collusion and reduced competition.
58
What is a mortgage?
An agreement with a financial institution to borrow money to purchase a property ## Footnote Mortgages typically involve long-term repayment plans and interest.
59
What does movement along the demand curve indicate?
When the price changes, leading to a movement up or down the existing demand curve ## Footnote This reflects the law of demand: as price decreases, quantity demanded increases.
60
What does movement along the supply curve represent?
When the price changes, leading to a movement up or down the existing supply curve ## Footnote This illustrates the law of supply: as price increases, quantity supplied increases.
61
What are national insurance contributions?
Contributions paid by employee and employer to pay towards state benefits ## Footnote These contributions fund various social security benefits.
62
What is net pay?
Earnings after all deductions have been taken ## Footnote Net pay is what employees take home after taxes and other deductions.
63
Define opportunity cost.
The next best alternative given up when making a choice ## Footnote Understanding opportunity cost helps in making informed economic decisions.
64
What does PED stand for?
Price Elasticity of Demand: the responsiveness of quantity demanded to a change in price of the product ## Footnote PED helps businesses understand consumer behavior regarding price changes.
65
What are pension contributions?
Contributions paid by employee and employer towards future pension payments ## Footnote These contributions are crucial for ensuring financial security in retirement.
66
What does PES stand for?
Price Elasticity of Supply: the responsiveness of quantity supplied to a change in price of the product ## Footnote PES helps producers gauge how much to supply when prices fluctuate.
67
How is price defined in economics?
The sum of money paid by a consumer to a producer for a good or service, determined by the interaction of supply and demand ## Footnote Price serves as a signal to both consumers and producers in the market.
68
What is the primary sector of the economy?
Direct use of natural resources, such as extracting basic materials and goods from the land or sea ## Footnote The primary sector includes industries like agriculture, fishing, and mining.
69
Who is considered a producer?
An individual, company or country that makes, grows or supplies goods and/or services ## Footnote Producers play a vital role in the economy by providing the goods and services needed by consumers.
70
What are product markets?
Where final goods and services are offered to consumers, businesses, and the public sector.
71
Define production.
Total output of goods or services produced by a firm or industry in a period of time.
72
What is productivity?
A measure of the degree of efficiency in the use of factors of production, measured as output per unit of input.
73
How is profit calculated?
Total revenue minus total costs, including opportunity costs.
74
What is saving?
The part of a person's disposable income which is not spent on consumption.
75
What are scarce resources?
Insufficient amount of something to satisfy all wants.
76
What does the secondary sector include?
Manufacturing or construction activities.
77
Define service in economic terms.
An intangible product that cannot be seen or touched.
78
What is a shift of the demand curve?
A complete movement of the existing demand curve either outward (to the right) or inward (to the left).
79
What is a shift of the supply curve?
A complete movement of the existing supply curve either outward (to the right) or inward (to the left).
80
Define social sustainability.
The impact of development that promotes an increase in the quality of life for all, now and in the future.
81
What is specialisation?
The process whereby individuals, firms, regions, or countries focus on producing what they are best at.
82
What is a subsidy?
An amount of money the government gives directly to firms to encourage production and consumption.
83
Define supply.
The willingness and ability of firms to provide a good or service at a given price over a given time period.
84
What is meant by supply of labour?
The amount of workers willing and able to supply their labour, including the unemployed.

ECONOMICS MICRO OCR DEFINITIONS (2 decks)

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