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Flashcards in Micro AS Deck (100)
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1
Q

value judgements

A

statements or opinions expressed that cannot be tested against real world data and depend a lot on the individuals views

2
Q

normative statement

A

statement/opinion that requires a value judgment to be made

3
Q

positive statement

A

can be tested against real world data

4
Q

basic economic problem

A

needs and wants are endless but resources are finite- economics looks at how best to employ the resources to maximize economic welfare

5
Q

4 factors of prodiction

A

land, labor , capital, entrepreneurship

6
Q

rewards for the factors of procuction

A

land-rent, labor-wages, capital-interest, entrepreneurship-profit

7
Q

3 functions of price

A

rationing(consumers) incentive(producers) signaling(entrepreneurs)

8
Q

ppf/ppb

A

production possibility frontier/boundary- shows maximum output achievable given a fixed set of resources and tech in a given time frame

9
Q

factors that shift ppf to the right

A

investment in new tech, increased supply of labor, more resources, improvements in human capital (training/education), increased productivity, encouraging entrepreneurship

10
Q

human capital

A

the skills abilities, motivation and knowledge of labour

11
Q

productivity

A

a measure of efficiency measuring the ratio of inputs to outputs

12
Q

factors that shift ppf to the left

A

war, emigration, disease, disaster,decline in investment in capital

13
Q

productive efficiency

A

when a firm operates at maximum average total cost producing the maximum possible output possible from its inputs, For the economy as a whole occurs when it is impossible to produce more of one good without producing less of another or you cant make one person bettor off without another becoming worse off

14
Q

allocative efficiency

A

occurs when available resources are used to produce the combination of goods that best matches peoples tastes and preferences

15
Q

demand

A

the amount that consumers are willing and able to buy at each given price level

16
Q

supply

A

the amount that producers are willing and able to supply at each given price level

17
Q

contraction in demand

A

when demand shrinks along the demand curve

18
Q

extension in demand

A

when demand rises (along the demand curve)

19
Q

determinants of demand

A

changes in population, seasonality, low interest rates, income changes, prices of substitutes, advertising, consumer confidence, changes in quality, law, fashion, consumer tastes and preferences, uncertainty over future prices

20
Q

inferior good

A

goods or services that will see demand fall as incomes rise

21
Q

normal good

A

good or service for which demand rises when incomes rise

22
Q

substitute

A

A good that can be used as a replacement for another good

23
Q

complementary product

A

a good that is consumed together with another good

24
Q

composite demand

A

a good that is demanded for more than one purpose so that when demand for one purpose increases supply for the other decreases

25
Q

derived demand

A

when the demand for one good or service comes from the demand for another good or service

26
Q

price elasticity of demand

A

the responsiveness of demand to a change in price

27
Q

formula for PeD

A

%change in Qd/ %change in price

28
Q

interpretation of PeD

A

if the number is above 1=price elastic if below 1= inelastic perfectly elastic=infinity (1= unitary)

29
Q

Income Elasticity of Demand

A

responsiveness of demand to a change in income

30
Q

YeD formula

A

%change in Qd/%change in income

31
Q

interpretation of YeD

A

-ive= inferior +ive=normal

32
Q

opportunity cost

A

the next best alternative forgone when an economic decision is made

33
Q

cross price elasticity of demand

A

the responsiveness of demand of one good to a change in price of another good

34
Q

XpeD formula

A

%change in Qd of good a/ %change in price of good b

35
Q

interpretation of XpeD

A

-ive=complementary +ive=substitutes between 1 and -1 inelastic

36
Q

determinants of supply

A

change in production costs, change in wages, change in indirect taxes, change in technology, subsidies, change in productivity, expectation of future prices, number of sellers in the market, firms objectives, joint supply, regulation +bureaucracy

37
Q

joint supply

A

when one good is produced another good is also produced from the same raw materials

38
Q

price elasticity of supply

A

responsiveness of supply to a change in price

39
Q

PeS formula

A

%change in Qs/ %change in price

40
Q

factors affecting PeS

A

time, extraction+processing raw materials, availability of stocks/stockpiling, ease of switching between methods of production, availability of spare capacity, number of firms in the market, ease with which firms can enter the market, ability to alter production methods

41
Q

equilibrium

A

the price at which demand equals supply and there is no tendency for change

42
Q

disequilibrium

A

the price at which supply doesn’t equal demand and there is likely to be a further change or reaction by buyers or sellers

43
Q

excess supply

A

when qs at a particular price is greater than qd

44
Q

excess demand

A

when qd at a particular price is greater than qs

45
Q

minimum price

A

a price floor beneath which price is no allowed to fall

46
Q

commodity

A

unbranded, homogeneous good (usually a raw materials or semi manufactured) bought and traded in bulk

47
Q

factor markets

A

commodity needed to make a good

48
Q

production

A

process that converts input into outputs of goods and services

49
Q

labor productivity

A

measures output per worker or hour worked

50
Q

fixed cost

A

doesn’t vary with output (in short term)

51
Q

variable cost

A

varies with output

52
Q

labour productivity

A

total output per time period/ units of labour

53
Q

economies of scale

A

as the scale of production of a firm increases long run average costs fall

54
Q

internal economies of scale

A

cost saving resulting in the growth of the firm itself

55
Q

external economies of scale

A

cost saving resulting in the growth of the industry

56
Q

examples of internal economies of scale

A

R+D, financial, managerial, marketing ,bulk buying, technical

57
Q

examples external economies of scale

A

technology, R+D , education , infrastructure

58
Q

diseconomies of scale

A

as the scale of production of a firm increases long run average cost rises

59
Q

examples of diseconomies of scale

A

int- failure of - communication, control, coordination, cooperation
external- pollution

60
Q

point at which LRAC is lowest is all known as

A

proactive efficiency

61
Q

for what kind of firm will LRAC never rise

A

monopolies/ natural monopolies e.g. national grid

62
Q

short run

A

at least one factor of production is fixed usually land

63
Q

long run

A

all factors of production are variable

64
Q

total revenue

A

price x units sold

65
Q

average revenue

A

total revenue / no. sold = price

66
Q

a firms demand curve also shows

A

its average revenue

67
Q

market structures from most to least competitive and least to most concentrated

A

perfect competition, monopolistic competition, oligopoly, monopoly

68
Q

features of a perfectly competitive market

A

perfect information, firm is a price taker, homogenous good, many small firms, low barriers to entry, consumer sovereignty, ability to buy and sell as much as you want at the ruling market price, factors of production are perfectly mobile

69
Q

features of a monopoly

A

imperfect/asymmetric info, firm has full control over price, one large firm, high barriers to entry , producer sovereignty

70
Q

factors used to determine market structure

A

numer of firms, product differentiation, barriers to entry, extent to which knowledge is perfect, influence of firms on price

71
Q

CSR

A

corporate social responsibilities

72
Q

objectives of firms

A

profit maximisation short/long run , sales maximisation, market share maximisation, survival, quality CSR

73
Q

we assume that firms are

A

short run profit maximisers

74
Q

division of labour

A

breaking down the production process down in to a sequence of tasks with workers assigned to particular tasks

75
Q

benefits of specialisation of labour

A

workers become specialised, increases productivity, wage costs fall, greater output, allows for specialist machinery

76
Q

specialisation

A

a worker preforming one task or a series of narrow tasks, also different firms specialising in producing particular goods or services

77
Q

consumer sovereignty

A

through exercising their spending power consumers collectively determine what is produced in a market

78
Q

producer sovereignty

A

producers or firms in a market decided what is produced and what is charged

79
Q

pure monopoly

A

one firms, price setter ,complete barriers to entry

80
Q

monopoly power

A

ability to dictate prices, high barriers to entry, big firm

81
Q

factors which influence monopoly power

A

number of competitors, market share of the incumbent (the largest firm) concentration ratio, branding/advertising, barriers to entry, degree of product differentiation

82
Q

barriers to entry natural vs artificial

A

nat- start up costs, economies of scale artificial- patents, predatory pricing

83
Q

concentration ratio

A

a ratio which indicates the total market share of a number of leading firms in a market or the total output of these firms as a percentage of total market output

84
Q

problems with monopolies

A

restrict supply -> proactively and allocative inefficient higher prices, reducer consumer welfare, lack of chow, exploit customer

85
Q

benefits of monopolies

A

R+D economies of scale internationally competitive

86
Q

Why competition is desirable

A
Lower prices
More choices 
Greater efficiency
Better quality
Invention and innovation 
Consumer surplus
87
Q

Market failure

A

Occurs when the free market fails to deliver an efficient allocation of resources
Leads to over/under production/consumption

88
Q

Missing market

A

A situation in which there is no market because the functions of price have broken down. This is a complete market failure

89
Q

Causes of market failure

A
Externalities
Merit and demerit good 
Public gooods
Monopoly 
Inequality in distribution of income and wealth 
Factor immobility 
Imperfect information
90
Q

Public good

A

Good that is non excludable, non rejectable and non rival

91
Q

State provision

A

Gets around the problem of free riders in public goods

92
Q

Externality

A

Cost or benefit that spill over to third parties outside the market transaction

93
Q

Indirect tax

A

A tax on spending

94
Q

Incidence of tax

A

The proportion of tax that is passed into the consumer

95
Q

Merit good

A

Good with positive externalities. Will generally be under consumed in the free market

96
Q

Demerit good

A

Good with negative externalities. Will generally be over consumed in a free market

97
Q

Occupational immobility

A

As patterns of demand and employment change workers find it hard to get new jobs as they lack the necessary skills

98
Q

Geographical immobility

A

Workers find ur difficult to move to areas with employment opportunities due to familial ties and housing costs

99
Q

Policies to deal with income / wealth inequality

A

Income tax, free school meals, mandatory schooling, inheritance tax, benefits, subsidised childcare, bursaries, free healthcare

100
Q

Consumer surplus

A

Difference between equilibrium price and price the consumer is willing to pay. Larger the surplus the greater the welfare