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Economics AQA > Micro definitions > Flashcards

Micro definitions Flashcards

1
Q

Allocative efficiency

A

When economic resources are utilised to produce the combination of goods and services that maximise economic welfare.

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2
Q

productive efficiency

A

producing goods and services with the optimal combination of inputs to produce maximum output (for a minimum cost)
the economy must be producing on its PPF

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3
Q

Allocative price function

A

Prices allocate resources away from markets with excess demand.

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4
Q

capital

A

Producer goods/manmade resources used in the production of goods and services/ assets of businesses

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5
Q

Capital/Producer goods

A

Goods used in the production of other goods

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6
Q

Ceteris Paribus

A

All other things being held constant

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7
Q

Choice

A

Selecting one of multiple alternatives when deciding how to allocate scarce resources

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8
Q

Consumer goods

A

Goods consumed by households and individuals and are used to satisfy needs and wants

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9
Q

economic welfare

A

the economic satisfaction/wellbeing of individuals/households/groups in an economy

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10
Q

enterprise

A

the ability to utilise factors of production, such as land labour and capital

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11
Q

factors of production

A

inputs of the production process, such as land, labour, capital and enterprise

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12
Q

finite resources

A

non-renewable resource that becomes increasingly scarce

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13
Q

fundamental economic problem

A

deciding how best to allocate scarce resources to maximise overall economic welfare

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14
Q

imperfect information

A

when individuals lack the information to make the best decision

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15
Q

incentive price function

A

prices create incentives for people to adjust their economic transactions

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16
Q

infrastructure

A

facilities required for an economy to function

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17
Q

labour

A

workers with human capital

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18
Q

land

A

natural physical materials, as well as space for fixed capital

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19
Q

need

A

something necessary for human survival e.g. food, shelter

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20
Q

normative statement

A

statements including value judgements, that cannot be easily proved/disproved

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21
Q

opportunity cost

A

the next best alternative forgone when a choice us made

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22
Q

Pareto efficiency

A

state of resource allocation, where in order to make an economic agent better off, another agent is made worse off.

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23
Q

positive statement

A

statements including facts that can easily be proved/disproved

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24
Q

production possibility frontier

A

a curve displaying gate various possible combinations of two products that can be produced with finite resources

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25
rationing price function
prices rise to ration demand for goods
26
renewable resources
restorable resources that can be replenished
27
scarcity
a decision or choice has to be made because there is a limited number of supplies to meet the infinite amount of wants and needs of scoiety
28
signalling price function
prices provide information to sellers and buyers, influencing economic decisions
29
trade
buying and selling of goods and services
30
value judgements
statements that are subjective and based on opinion rather than factual evidence
31
want
something desirable, yet not necessary for human survival
32
trade-off
making a decision normally involves a tradeoff. which means that choosing one or more of one thing can only be achieved by giving up something else in exchange. e.g. buying a house or renting
33
market
a place to buy and trade goods and services
34
law of demand
states that demand varies inversely with price
35
demand
the quantity that purchasers are willing and able to buy at a given price in each time period
36
purchasing power
number of goods and services an income is able to buy
37
complementary goods
two goods that are used in conjunction with one another
38
substitute goods
two goods that have the same function
39
normal goods
as income rises the demand increases (demand is directly proportional to income)
40
inferior goods
as income rises demand decease (demand is inversely proportional to income)
41
derived demand
the demand for a factor of production that is used to produce another good or service
42
joint demand
when the demand for one product is directly and positively related to market demand for a related good or service (similar to complementary goods)
43
composite demand
where goods can have more than one use
44
market demand
the sum of the individual demand for a product from buyers in the market.
45
law of supply
as the price of a product rises firms expand supply. (quantity supplied is directly proportional to price level)
46
market supply
the total amount of an item producers are willing and able to sell at different prices over a given period of time
47
joint supply
where an increase or decrease in the supply of one good leads to an increase or decrease in supply of a by-product e.g. if you produce sheep you also ca get wool.
48
incentive price function
Prices provide agents with incentives to alter their behaviour e.g. higher prices = higher reward = higher supply
49
signalling price function
tells producers where resources are or are not needed
50
price elasticity of demand (PED)
measures the responsiveness of the quantity demanded of a good or service to change in its price PED = %▵Qd for x / %▵P of x (always negative because it represents the law of demand - inversely proportional)
51
elastic demand
PED is greater than 1 (demand is changing more than price)
52
inelastic demand
PED is less than 1 (demand is changing less than price)
53
perfectly inelastic demand
PED is 0 (demand is not responsive at all)
54
perfectly elastic demand
PED is infinity (highly responsive)
55
unitary elasticity
PED = 1 (P and Qd are directly proportional)
56
revenue
income received by a firm for selling goods or services (P x Qsold)
57
income elasticity of demand (YED)
measures the responsiveness of the quantity demanded of a product to a change in income. YED = %▵Qd / %▵Y normal goods + inferior goods -
58
cross elasticity of demand (XED)
measures the responsiveness of the quantity demanded of one good to a change in the price of another related good. XED = %▵ Qd of A / %▵ P of B substitute goods + complementary goods -
59
price elasticity of supply (PES)
measures the responsiveness of the quantity supplied of one good to a change in its price PES = %▵ Qs / %▵ P (always positive because its directly proportionate and reflects the law of supply)
60
elastic supply
▵P is less than ▵Qs
61
inelastic supply
▵P is greater than ▵Qs
62
perfectly inelastic supply
▵P = no ▵ Qs
63
perfectly elastic supply
▵ P = no supply
64
subsidy
government support offered to producer (or consumers) to reduce the cost to supply. usually leads to an increase in the Qs sold at a lower market price.
65
indirect taxes
taxes on expenditure e.g. VAT. they are paid indirectly by the suppliers of the goods and services
66
direct taxes
taxes on income, profits and wealth, paid directly by the bearer to tax authorities. e.g. income tax, corporation tax
67
market failure
occurs when theres an inefficient allocation of resources in a free market.
68
production externalities
impact on 3rd parties of production decisions
69
internalising the externality
make the decision maker take into account 3rd party impacts
70
regulations
requirements the government imposes on private firms and individuals to achieve governments purposes
71
bans
a form of regulations for products to remove their negative externality
72
imperfect information
a situation where buyers or sellers lack complete, accurate, and reliable information to make informed decisions.
73
public goods
goods/services which are both non-rival and non- excludable e.g. flood defence
74
non rival
consumption by one person does not reduce the supply available for others
75
non excludable
the benefits derived from them cannot be confined to those who have paid for It (non payers enjoy the benefits of consumption at no financial cost)
76
quasi-pubic goods
near public goods, with some characteristics of a public good
77
semi non rival
up to a point, more consumers using it do not reduce the space available for others e.g. a park
78
semi non excludable
its possible but difficult or costly to exclude non paying consumers e.g. fencing a park
79
merit goods
goods that society values and judges that people should have regardless of their ability to pay.
80
demerit goods
a category of goods which are believed to have a negative externality that are not fully recognised by individuals consuming the goods
81
factor immobility
scarce resources cannot easily be moved from one use to another
82
progressive tax
higher income earners pay a greater proportion of income in tax - helps reduce inequality
83
private goods
a product or service that is rivalrous (one person's consumption reduces the availability to others) and excludable (it's possible to prevent those who don't pay from consuming it).
84
marginal tax
the tax rate increases with additional income
85
government failure
exists when government intervention to correct one or more market failures leads to a greater net social welfare loss. When the costs of government intervention to correct a market failure exceed the benefits
86
moral hazard
the decision maker is not taking the risk
87
regulatory capture
when those who regulate are too close to certain industries and so they lose their ability to be objective.
88
price floor/minimum price
government-imposed price controls that set the lowest legal price at which a good or service can be sold.
89
price ceiling
a limit or cap on a price set by a government or an organisation

Economics AQA (11 decks)

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