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Economics > Key Terms 2 > Flashcards

Key Terms 2 Flashcards

1
Q

Adverse Selection

A

A situation where good suppliers are forced out of a market because consumers arn’t prepared to pay the price that they need to charge in order to survive

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2
Q

Consumer moral hazard

A

A situation in which consumers get involved in a risky event knowing that it is protected against the risk and the producer will incur the cost

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3
Q

Deadweight welfare loss

A

The amount of social welfare lost forever as a result of either a market failure or a producer artificially raising prices

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4
Q

Demerit goods

A

Products which are considered to be bad by society because they generate negative externalities in production

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5
Q

Externalities

A

A cost or benefit that is felt outside of the market by third parties

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6
Q

Externalities in consumption

A

A third party effect of a market that is created in the consumption of a product

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7
Q

Externalities in production

A

A third parry effect of a market that is created in the production of a product

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8
Q

Factor immobility

A

A situation where scarce resources are not easily moved between different uses

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9
Q

Imperfect knowledge

A

A situation where a decision maker does not have the full information required to make a good decision

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10
Q

Information asymmetry

A

A situation where either the producer or the consumers better information about a market than the other one

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11
Q

Information failure

A

A situation where there is imperfect knowledge when decisions are being made

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12
Q

Irrational Behaviour

A

A situation in which a decision maker makes a decision that is not drive by the desire to maximise their own self interest

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13
Q

Labour immobility

A

A situation where workers are not easily able to move between jobs

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14
Q

Marginal external benefit

A

The extra benefit of producing an extra unit of output received by people outside the market

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15
Q

Marginal external cost

A

The extra cost of producing an extra unit of output paid by people outside the market

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16
Q

Marginal private benefit

A

The extra benefit of producing an extra unit of output received by people inside the market

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17
Q

Marginal private cost

A

The extra cost of producing an extra unit of output paid b y people inside the market

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18
Q

Marginal social benefit

A

The total extra benefit of producing an extra unit of a product. It is calculated by adding MPC to MEC

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19
Q

Marginal social cost

A

The total extra cost of producing an extra unit of a product. Calculated by adding MPC to MEC

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20
Q

Market failure

A

A situation where a market doesn’t efficiently allocate scarce resources

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21
Q

Merit goods

A

Products that are valued by society because they create positive externalities in consumption

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22
Q

Moral hazard

A

A situation in which one party gets involved in a risky event knowing that it is protected against risk and the other party will incur the cost

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23
Q

Natural monopoly

A

A situation where the market means only one firm can survive

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24
Q

Negative externalities

A

A third party effect of a market that is bad

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25
Q

Non excludable

A

Products where a consumer cannot be stopped from consuming the product if they don’t pay for it

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26
Q

Non rival

A

Products where the consumption of a product does not stop other people from consuming it

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27
Q

Partially missing market

A

A market where a product is provided but it is either over or under produced

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28
Q

Positivity externalities

A

A third party effect of a market that is good

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29
Q

Pure monopoly

A

A market in which there is only one firm

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30
Q

quasi public goods

A

Products which have one of the two characteristics of public goods

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31
Q

public goods

A

Products which are both non excludable and non rival

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32
Q

The command system

A

A way of organising an economy so that decisions about the allocation of scarce resources are made by the government

33
Q

The market system

A

A way of organising an economy so that all decisions about the allocation of scarce resources are made by producers and consumers so the forces of supply and demand

34
Q

The mixed system

A

A way of organising an economy so that decisions about the allocation of scarce resources are sometimes made by the forces of supply and demand and sometimes by the government

35
Q

Barriers to entry

A

Characteristics of a market that make it more difficult for a business to set up in an industry

36
Q

Concentration

A

The degree to which an industry is made up of a few large firms

37
Q

Concentration ratio

A

A measure of the market share control by the largest firms in the industry

38
Q

Differentiation

A

The way a producer makes their goods different from similar products

39
Q

Monopolistic competition

A

A market made up of many small buyers and sellers, where products are very slightly differentiated, there are no barriers to entry and there is perfect knowledge

40
Q

Monopoly power

A

A measure of the extent to which a business influences its own prices without loosing out to competitors

41
Q

Oligopoly

A

A market made up of few very large firms that are independent

42
Q

Perfect competition

A

A market made up of many small buyers and sellers, where products are homogenous and their are no barriers to entry

43
Q

Abnormal profit

A

The profit of a business that is more than the opportunity cost to them staying in the industry

44
Q

Acounting profit

A

The profit published by business for tax purposes, calculated by subtracting total costs from total revenues

45
Q

Average total cost

A

The mean of the costs of producing a product - the cost of producing one item

46
Q

Break even

A

Where a businesses sells enough items so that its revenue equals its costs so that the profit is zero

47
Q

Average revenue

A

The mean selling price of a product ie the money brought into a business from selling one unit

48
Q

Capital goods

A

Products that are produced in order to produce other products

49
Q

Capital Intensive

A

Where the output of a business is produced using a higher proportion of machinery than workers

50
Q

Communication diseconomies

A

where growing businesses are increasingly difficult to run as a result of communication difficulties so that the unit cost rises as the business grows

51
Q

control diseconomies

A

where the unit costs of a business rises as it grows as a result of the business getting more difficult to control

52
Q

Diseconomies of sale

A

where the unit costs increase as the size of a business increases

53
Q

Cooperation economies

A

where the unit costs of a business falls as a result of the industry going and the competing firms workigntogethe e.g on research and development

54
Q

economies of scale

A

the falling cost of production per unit as output increases

55
Q

External economies of scale

A

cost saving benefits which arise when similar businesses are located near each other

56
Q

Financial economies

A

when the unit costs of a business falls as it grows because it is more able to negotiate better interest rates with its bank

57
Q

intermediate goods

A

products that are made to be used as part of another larger product

58
Q

Labour intensive

A

where the output of a business is produced using a larger proportion of workers than machinery

59
Q

labour relations diseconomies

A

diseconomies of scale because a businesses employees are more likely to take industrial action to get pay rises

60
Q

long run

A

A period of time where all factors of production are variable

61
Q

long run average cost

A

the cost of making one unit when all factors of production are variable

62
Q

managerial economies

A

economies of scale as a result of a business employing specialist managers, who will be more efficient

63
Q

market sales

A

the percentage of industry sales madd by one firm in that industry

64
Q

market share maximisation

A

an objective of a business where they are trying to be the largest firm in that industry

65
Q

minimum efficient scale

A

the smallest size that a business can be and still and still be at the lowest point of its average cost curve

66
Q

normal profit

A

the minimum amount of profit required by the entrepreneur to stop them from moving industry. It is also known as the opportunity cost of the entrepreneur

67
Q

optimum scale

A

There size of a businsess that minimises its unit costs in the long run

68
Q

outsourcing economies

A

economies of scale as a result of the business being able to save money by contracting outside companies to undertake a part of its production process

69
Q

purchasing economies

A

economies of scale as a result of the business being able to buy stock in bulk in order to get cos reductions

70
Q

risk bearing economies

A

economies of scale as a result of a business being able to spread the risks of its operations over a greater number of products

71
Q

sales revenue

A

the amount of money coming into a business by selling its products

72
Q

Sales revenue maximisation

A

an object of a business where they are tying to achieve the highest possible amount of products sold

73
Q

short run

A

A period of time where at least one factor of production is fixed

74
Q

specialisation

A

the act of concentrating on one or a small number of things in order to get good at them

75
Q

support services economies

A

economies of sales because other businesses set up near the business in order to provide it with services

76
Q

surplus output

A

the extra output created in specialisation that we do not need for ourselves

77
Q

surplus value

A

the different between the cost of producing a product and the price consumers are willing to pay, which workers create but are not paid for

78
Q

survival

A

an objective of a business where they are trying to achieve just enough profit to keep them in business

79
Q

technical economies

A

economies of scale as a result of a business being able to buy better machinery as it grow

Economics (6 decks)

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