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Microeconomic key terms Flashcards

(87 cards)

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1
Q

Basic economic problem

A

Unlimited wants v.s scarce resources

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2
Q

Opportunity cost

A

next best alternative forgone

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3
Q

Capital

A

equipment used to produce goods and services (factories, machines, tools)

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4
Q

Enterprise

A

the willingness to take a risk and make a profit

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5
Q

Land

A

All natural resources in and on land (oil, precious metals)

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6
Q

Labour

A

the work done by people

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7
Q

Non renewable resource

A

A natural resource which is not replenished at the rate at which it is consumed

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8
Q

Renewable resource

A

Replenished naturally over time

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9
Q

Ceteris Paribus

A

means “all other things being equal”

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10
Q

Need

A

something necessary for human survival

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11
Q

Want

A

something that is desireable but not necessary

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12
Q

Production

A

a process that converts inputs into (finished) outputs

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13
Q

Good job

A
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14
Q

Consumer good

A

consumed by individuals/households to satisfy their wants and needs

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15
Q

FOP

A

inputs into the production process(CELL)

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16
Q

Finite resource

A

is scarce and runs out as it is used

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17
Q

Basic/fundemental economic problem

A

how best to make decisions about the allocation of scarce resources among competing uses

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18
Q

Positive statement

A

A statement of fact that can be scientifically tested to see if it is correct or incorrect (using evidence)

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19
Q

Normative statement

A

a statement that includes a value judgement and cannot be refuted just by evidence

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20
Q

Production possibility frontiers

A

shows the maximum output combinations of two g/s in an economy when it’s resources are fully and efficiently employed

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21
Q

Specialisation

A

when a country/firm/region focuses on the production of one type of g/s

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22
Q

Division of labour(second type of specialisation)

A

workers specialise within the production process (focus on certain skills/work)

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23
Q

Production

A

value of goodsand services produced

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24
Q

Prodcutivity

A

Output per unit of input (output per worker)

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25
Liquidity
the ease with which an asset can be converted into cash
26
economic system
a set of social indtitutions which deal with the production, distribution and consumption fo g/s
27
Price mechanism
when the forces of d/s determine how much is bought and sold and by whom
28
Demand
The quantity consumers are willing and able to buy at a given price in a given time period ceteris peribus
29
Derived demand
goods that are only demanded because they are required for the production of other goods
30
Law of diminishing marginal utility
the utility that individuals gain from the last product consumed (one more unit) falls as a greater number of products are consumed
31
Utility
the satisfaction obtained from consuming a good or service
32
Income effect
33
Supply
the willingness and ability for producers to supply a g/s at a given price in a given time period
34
Consumer surplus
Difference between what consumers are prepared to pay and what they actually pay
35
Producer surplus
Difference between the price producers are prepared to supply at and the market price they recieve
36
PED
the responsiveness of quantity demanded to a change in price
37
PES
responsiveness of supply of goods or services to a change in market price
38
YED
responsiveness of demand to a change in income
39
normal goods
as income rises, demand for this good increases
40
inferior goods
as income rises, demand for this good falls
41
Substitute
goods in competitive demand that act as a replacemnent for another good
42
Complements
goods which tend to be bought with each other(joint demand)
43
XED
measures the responsiveness of quantity demanded of good B to the price of good A
44
rational behaviour
a decision making process that is based on making choices that result in the optimal level of benefit or utility
45
rational decision making
choosing the option that results in the greatest level of satisfaction
46
utility
satisfaction an individual derives from the consumption of a g/s
47
Marginal utility
the change in satisfaction from consuming an extra unit
48
inertia
consumers tend to do nothing or remain unchanged
49
indirect taxes
taxes imposed on the consumption, sale or use of goods and services (expenditure on a g/s)
50
tax burden
total amount of tax paid by a particular group of people
51
specific tax
imposes a flat rate of tax (charges a fixed amount)
52
ad valorem tax
%-based tax that is imposed depending on its value ie VAT and stamp duty
53
bounded rationality
people's ability to make rational decisions is limited (opt to satisfice)
54
satisfice
accepting satisfactory outcome rather than optimum
55
externalities
costs or benefits to 3rd parties from a transaction that is not reflected in the market price
56
Market failure
in a free market, this is when the allocation of goods and services is not efficient and equitable(fair/impartial)
57
private cost
internal costs to the producer or consumer directly involved in the transaction
58
external cost
a negative effect on the wellbeing of a 3rd party not involved in the transaction social cost> private cost
59
private benefit
the satisfaction or utility an economic agent derives from the production or consumption of a good
60
external benefit
positive effect of a market transaction on 3rd parties
61
Marginal private cost (MPC)
internal cost to a producer or consumer for supplying/consuming an additional unit
62
Marginal private benefit (MPB)
additional staisfaction or utility to a producer or consumer for supplying/consuming an additional unit
63
MEC (marginal external cost)
Cost to 3rd parties from the consumption/production of an additional unit
64
MSC
total cost to society for the production/consumption of an additional unit
65
negative externality
costs to third-parties from a transaction that is not reflect in market price (MSC> MPC)
66
positive externality
benefits to 3rd parties from a transaction that is not considered in the market price (MSB> MPB)
67
rivalrous
if one person consumes it, someone else cannot ie petrol
68
excludable
you can prevent someone from using a good/service ie if they dont pay (cinema ticket)
69
private good
excludable and rivalrous
70
public good
non excludable and non rivalrous
71
quasi-public
not fully non-rival and/or non-excludable ie road pricing
72
price ceiling
a regulated max. price in the market (producers cannot legally offer a higher price)
73
price floors
a regulated min. price in the market
74
imperfect information
when people have inaccurate, incomplete or misunderstood data which causes them tomake the wrong decison that does not maximise their welfare
75
asymetric information
where buyers and sellers have different levels of information
76
government failure
where government intervention, intended to improve economic outcomes or correct market failures, actually leads to inefficiencies and a welfare loss
77
moral hazard
lack of incentive to guard against risks where one is protected from consequences ie insurance
78
social science
study of human behaviour and interactions
79
irrational behaviour
where decisions do not optimise utility
80
total economic welfare
producer+ consumer suprlus
81
substitute good
goods which can be used in place of each other
82
market failure
where price mechanism doesnt result in social optimum price/qty
83
adverse selection
where info asymmetry leads to a narrower selection in the market
84
merit goods
would be demanded more if consumers had full info.
85
tax
charge levied by the govt
86
producer incidence
proportion of govt revenue taken from c=producer surplus
87
Deadweight loss
the reduction in net economic benefits resulting from an inefficient allocation of resources

Economics key terms (2 decks)

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