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Economics AS > Definitions > Flashcards

Definitions Flashcards

(79 cards)

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1
Q

What are economic goods?

A

Resources which are scarce

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2
Q

What are free goods?

A

Resources which aren’t scarce

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3
Q

What is opportunity cost?

A

Value of the next best alternative forgone

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4
Q

What is a renewable good/service?

A

Can be exploited over & over again, stock level maintained over time

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5
Q

What is a non-renewable good/service?

A

Once exploited can’t be replaced, stock level decreases over time

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6
Q

What is a sustainable resource?

A

A renewable resource economically exploited in a way that won’t diminish

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7
Q

What is scarcity?

A

Insufficient resources to provide for everyone’s wants

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8
Q

What is labour?

A

Workforce of an economy, each worker has unique set of characteristics

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9
Q

What is capital?

A

Manufactured stock of tools, machines etc. used in the production of goods/services

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10
Q

What is a production possibility frontier (PPF)?

A

Maximum potential output for 2 goods or services an economy can achieve when all resources are allocation efficiently

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11
Q

What is economic growth?

A

Where a country increases is productive potential/ GDP

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12
Q

What is specialisation?

A

System of organisation:

- concentrate on producing certain goods & trading surplus with others

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13
Q

What is division of labour?

A

Specialisation by individual workers

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14
Q

What is a free market economy?

A

All resources allocated by price mechanism, no government intervention

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15
Q

What is a mixed economy?

A

Some resources allocated by price mechanism, some by government

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16
Q

What is the substitution effect?

A

As price of good falls, it becomes cheaper relative to its substitutes so some consumers switch to cheaper goods

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17
Q

What is the income effect?

A

Price of good falls, real income of consumer my rise

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18
Q

What is elastic demand?

A

Responsiveness of demand > change in price

- PED>1

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19
Q

What is inelastic demand?

A

Responsiveness of demand

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20
Q

What is unitary elasticity?

A

Responsiveness of demand is equal to a change in price

- PED = 1

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21
Q

What is price elasticity of demand?

A

Responsiveness in the demand for a good due to a change in price
- (%changeD/%changeP)

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22
Q

What is income elasticity of demand?

A

Responsiveness of demand for a good or service to a change in real income
- (%changeD/%changeY)

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23
Q

What is real income?

A

Spending power of money income

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24
Q

What is normal good?

A

Where demand increases when income increases

- +ve

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25
What is an inferior good?
Where demand falls when income increases | - -ve
26
What is perfectly inelastic demand?
Quantity of demand doesn't change at all as price changes | - PED = 0
27
What is perfectly elastic demand?
Where buyers prepared to purchase all they an obtain at a given price but none at all at a higher price - PED = infinity
28
What is cross elasticity demand?
Responsiveness of demand for a good B to a change in price of good A - (%changeDB/%changeDA)
29
What is a complement?
Good which is purchased with other goods to satisfy a want - joint demand - -ve
30
What is a substiutute?
Good which can be replaced by another to satisfy a want - competitive demand - +ve
31
What is price elasticity of supply?
Responsiveness of the supply of a good to a change in price | %changeQS/%changeP
32
What is elastic supply?
% change in supply > % change in price | - PES>1
33
What is inelastic supply?
% change in supply
34
What is unit elastic supply?
% change in supply = % change in price | - PES = 1
35
What is perfectly elastic supply?
PES is infinite (horizontal curve)
36
What is perfectly inelastic supply?
Change in price has no effect on quantity supplies | - PES = 0 (vertical curve)
37
What is consumer surplus?
Extra money consumers prepared to pay for a good/service over and above what they actually pay
38
What is producer surplus?
Extra amount of money paid to producers above what they're willing to accept to supply a goods/service
39
What is the price mechanism?
Principal way of allocating resources in a market economy
40
What is a market economy?
Where buyers & sellers come into contact for purpose of exchange
41
What is a direct tax?
Levied directly on an individual or organisation
42
What is an indirect tax?
Levied on purchase of goods & services, represents tax on expenditure
43
What is a tax?
Compulsory charge made by the government
44
What is a subsidy?
Grand provided by the government to increase output by a firm and lower production costs
45
What is ad valorem tax?
Tax levied as a % of the value of the good e.g VAT
46
What is specific/unit tax?
Tax levied on volume e.g excise duties
47
What is the incidence of tax?
Tax burden on the tax-payer
48
What is derived demand?
When demand for 1 good is the result of or derived from the demand for another good
49
What is composite demand?
When a good is demanded for 2 or more distinct uses
50
What is joint supply?
When 2 or more complements are produced together | - change in supply of 1 good will change supply of other goods with which it is in joint supply in
51
What are unit labour costs?
Costs of employing labour per unit of output or production | total wage costs / total volume of goods made
52
What is the National Minimum Wage (NMW)?
Legal minimum hourly rate of pay an employer can pay it's workers (£6.70 for adults, £3.87 for 16-17yr olds, £5.30 for 18-20yr olds)
53
What is market failure?
Where resources are inefficiently allocation by the price mechanism
54
What are externalities (spillovers)?
Third party effects ignored by the price mechanism | - costs or benefits external to an exchange
55
What are external costs?
Negative externalities | - net social cost > net private cost
56
What are external benefits?
Positive externalities | - net social benefit > net private benefit
57
What are private costs/benefits?
Cost/benefit of an activity to an individual economic unit
58
What are social costs/benefits?
Cost/benefit of an activity to society as a whole
59
What are public goods?
- Non rivalry: consumption by 1 person doesn't reduce amount available for consumption by another - Non-excludability: once provided, no person can be excluded from benefiting (or suffering e.g pollution)
60
What is a merit good?
Under provided by the market mechanism | e.g health, education, insurance
61
What are demerit goods?
Over provided by the market mechanism | e.g drugs, alcohol, tobacco
62
What is a private good?
Consumption by 1 person results in good not being available for consumption by another
63
What is the free rider problem?
Person/ organisation which receives benefits that others have paid for without contribution themselves
64
What is a quasi-public good?
May not possess perfectly the characteristics of being non-excludable but which is non-rivalry
65
What is the principal-agent problem?
Goals of principals (those to gain/lose from decision on behalf of principals) e.g shareholders, managers, parents
66
What is symmetric information?
Where buyers & sellers have access to the game information
67
What is asymmetric information?
Where buyers & sellers have different amounts of information
68
What is mobility of labour?
Ability of workers to change from one job to another
69
What is geographical immobility?
Obstacles which prevent labour moving from 1 area to another to find work
70
What is occupational immobility?
Obstacles which prevent labour from changing their type of occupation to find work
71
What is inequality?
When the market mechanism creates unequal distribution of income & therefore some people in society cannot afford the basic necessities
72
What is carbon offsetting?
Firms pay for removal of carbon emissions elsewhere
73
What are tradable pollution permits (C-emissions trading)?
Firms can buy & sell allowances between them to curb CO2 emissions
74
What is minimum pricing?
Where the government aims to stabilise commodity prices & producer incomes through guaranteed minimum price schemes
75
What are buffer stock schemes?
Government agency scheme aiming to reduce price fluctuations of a commodity and stabilise producer incomes
76
What is government failure?
Occurs when government intervention leads to a net welfare loss compared to the free market solution
77
What is the public choice theory?
Theories about how & why public spending + taxation decisions are made - can be less serious than market failure
78
What is a positive statement?
Tested to be true or false
79
What is a normative statement?
Concerned with value judgements

Economics AS (2 decks)

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