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Economics > Econ 1 past Paper Defs > Flashcards

Econ 1 past Paper Defs Flashcards

0
Q

Real incomes

A

the amount of money coming into a household (received by an individual) over a period of time after the effects of inflation have been removed

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1
Q

Factors of production

A 
The resources used to produce output in four groups:
Land
Labour
Capital
Enterprise
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2
Q

Subsidies

A

payments such as grants made the Government which reduce the costs of production of goods or services and encourages increases in outputs

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3
Q

Productive efficiency

A

production takes place at the lowest point on a ‘u’- shaped average cost curve
maximising output from available inputs

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4
Q

Positive cross price elasticity of demand. (XED)

A

XED measures the extent to which a change in the demand for one product affects the price for a different product. It is positive when the two products are substitutes. Formulae:
% change in quantity demanded good X
divided by
% change in price of good Y

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5
Q

Marginal private costs

A

The change in cost Bourne by the consumer due to an increase or decrease in the consumption ( or production) of one more or less units of a good or service

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6
Q

Scare resources

A

Factors of production where demand exceeds supply

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7
Q

Composite demand

A

Demand for a good that has at least two uses eg wheat for food and biofuel

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8
Q

External cost

A

Cost received by a third party eg pollution

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9
Q

Price elasticity of supply

A

PES = percentage change in quantity supplied divided by percentage change in price

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10
Q

Market mechanism

A

The process through which markets solve the problem of allocating scarce resources between competing uses

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11
Q

Equilibrium price

A

The price at which the quantity demanded and quantity supplied are equal

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12
Q

Market failure

A

Occurs where production or use of goods and services is not efficient.

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13
Q

Opportunity cost

A

The next best alternative foregone

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14
Q

Free good

A

A good that does not use scare resources such as air

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15
Q

Labour Productivity

A

A measure of output per worker per period of time

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16
Q

Economies of scale

A

Reductions in average cost resulting from the growth in size of the firm eg. Specialist machinery, credit

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17
Q

Diseconomies if scale

A

When a firm grows beyond the scale of production that minimises average cost. Eg. Co-ordinating and controlling large scale processes

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18
Q

Income elasticity of demand YED

A

YED = % change in the quantity demanded of good X. Divided by the % change in real income of consumers

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19
Q

Normal goods

A

Goods with a positive income elasticity of demand eg. Mobile phones

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20
Q

Inferior good

A

Goods with a negative YED eg. Own label food

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21
Q

Competitive market

A

One where no individual supplier or consumer can influence the price

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22
Q

Derived demand

A

The demand for one good stems from demand for another. Eg. Demand for buildings raises demand for steel.

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23
Q

Merit goods

A

Goods that are under provided in a market economy. Eg. Education and healthcare

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24
Q

Public goods

A

Consumption by one person does not reduce availability for others.
Two key characteristics:
- non excludability ( can get it even without paying)
- non rivalry ( availability not limited by consumption)
Eg. Flood control systems, national defence

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25
Q

Quasi public goods

A

Have some of features of public goods but not all eg roads with tolls

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26
Q

Buffer stock

A

Stock used to stabilise prices of a product if there is fluctuating supply to prevent shortages occurring.

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27
Q

Demand

A

The quantity of goods or services that will be bought at any given price over a period of time

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28
Q

Supply

A

The quantity of goods and services that sellers are prepared to sell at any given price over a period of time

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29
Q

Substitution effect

A

The impact on quantity demanded due to a change in price assuming customers real incomes stay the same

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30
Q

Elastic demand

A

Where the price elasticity go demand is greater than 1. The reponsiveness of demand is proportionately greater than the change in price

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31
Q

Inelastic demand

A

Where the PED is less than 1. The responsiveness of demand is proportionately less than the change in price.

32
Q

Unitary elasticity

A

The value of PED is 1. Demand responds proportionately equally to changes in price

33
Q

Social cost or benefit

A

The cost or benefit of an activity to society as a whole

34
Q

Marginal

A

The last unit either produced or consumed

35
Q

Consumption externalities

A

Consuming a good causes either positive or negative externalities to a 3rd party

36
Q

Spillover effect or externalities

A

The difference between social costs and benefits and private costs and benefits

37
Q

Demerit good

A

One which is over provided in the market mechanism. Eg alcohol

38
Q

Ad velourem tax

A

Tax levied as a percentage of the value of the good

39
Q

Given good

A

An inferior good where demand increases when price increases

40
Q

Substitute

A

A good which can be replaced by another to satisfy a want

41
Q

Equilibrium

A

The point where what is expected or planned is equal to that happens

42
Q

Market

A

A place where buyers and sellers of goods and services meet and there is potential for an exchange to take place

43
Q

Information gap

A

Lack of information about the costs and benefits of goods and services in the marketplace

44
Q

Living standard

A

The amount of wealth,comfort, health and other factors like life expectancy that a particular person or country has

45
Q

Economic Inequality

A

The gap between rich and port in terms of wealth and income

46
Q

Private sector

A

Companies owned by the Government

47
Q

Price stability

A

A situation where prices in the economy don’t change much over time

48
Q

Free market provision

A

An economy where allocation of resources is only determined by the supply or demand for them

49
Q

Over consumption

A

Where the demand for goods and services has outpaced the capacity to supply them

50
Q

Tax revenue

A

The income gained by Government from taxation

51
Q

Basic economic problem

A

Unlimited wants and finite resources

52
Q

Production possibility frontier

A

The point when all the factors of production are fully employed and firms cannot produce more. the AS curve becomes perfectly inelastic

53
Q

Complements

A

Goods in joint demand where a good is purchased with another to satisfy a want eg. Tennis racket and tennis balls.

54
Q

Joint Supply

A

Where two or more goods are produced together so a change in supply of one will change supply of the other eg cows supplied for beef and leather

55
Q

Private good

A

A good where the consumption by one person results in the good not being available for consumption by another. Eg a banana

56
Q

Free rider problem

A

A person or organisation which receives benefits that others have paid for without contributing themselves. Eg migrants using NHS.

57
Q

Positive statement

A

Statements about economics that can be proven to be true or false. Eg the UK economy is operating on its production possibility boundary.

58
Q

Economic goods

A

Goods which are scarce because their use has an opportunity cost.

59
Q

Consumer surplus

A

The difference between how much buyers are prepared to pay for a good and what they actually pay.

60
Q

Producer surplus

A

The difference between the market price which firms receive and the price at which they are prepared to supply.

61
Q

Excess demand (shortage)

A

Where demand is greater than supply

62
Q

Excess supply (surplus)

A

Where supply is greater than demand

63
Q

Free market forces

A

Where consumers, producers and owners of the factors of production interact, each seeking to maximise their returns.

64
Q

Price elasticity of demand (PED)

A

Measures the proportionate response of quantity demanded to a proportionate change in price.
= p/q x change q/ change p

65
Q

Incidence of tax

A

The tax burden on the taxpayer

66
Q

Division of labour

A

Specialisation by workers e.g. Getting more skilled at one element of production rather than knowing whole.

67
Q

Specialisation

A

A system of organisation where economic units such as households or nations are not self sufficient , but concentrate on producing certain goods and services and trading the surplus.

68
Q

Economic efficiency

A

How well resources such as time, talents and materials, are used to produce an end result. It is the relationship between scarce inputs and outputs.

69
Q

Market failure

A

Where resources are inefficiently allocated due to imperfections in the workings of the market mechanism. Eg lack of information

70
Q

Negative externality. ( or spillover effect or external cost)

A

Where net social cost (social cost minus social benefit) is greater than private cost (private cost minus private benefit). Eg pollution from chemical plant impacting a water company.

71
Q

Private cost

A

Cost of an activity to an individual economic unit such as a consumer or firm.

72
Q

Normal profit

A

The profit the firm could make by using its resources in their next best use. Normal profit is an economic cost.

73
Q

Abnormal profit

A

The profit over and above normal profit.

74
Q

Monopoly

A

A market structure where one firm supplies all output in the industry without facing competition, because of high barriers to entry to the industry.

75
Q

Government failure

A

Occurs when government intervention leads to a net welfare loss compared to the free market solution.

76
Q

Minimum price

A

A low price often set by government to help producers ( eg farmers) increase incomes. They can lead to excess supply.

77
Q

Maximum price

A

A top price often fixed by government for a good in a market. maximum prices can create shortages and black markets. Eg a top price for housing rents to help alleviate homelessness.

Economics (4 decks)

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