Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Economics A Level (AQA) > Microeconomics Year 1 > Flashcards

Microeconomics Year 1 Flashcards

(77 cards)

Start Studying
1
Q

What is the definition of demand

A

The quantity of goods/services consumers are willing and able to purchase over a given time period at any given price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the non-price factors affecting DEMAND

A

P - Population
A - Advertising
S - Substitutes
I - Interest Rates
F - Fashion Trends
I - Income
C - Complementary goods

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is the definition of supply

A

The amount of goods/services that sellers are willing and able to sell at any given price over a period of time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are the non-price factors affecting SUPPLY

A

P - Productivity
I - Indirect Tax
N - No. of firms
T - Technology
S - Subsidies
W - Weather
C - Cost of production

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is the definition of PED and equation

A

PED measures the responsiveness of demand after a change in a product’s own price (always negative)

PED = %change in Quantity demanded / %change in Price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are the factors affecting elasticity

A

S - Substitutes
P - Percentage of income
L - Luxury/ Necessity
A - Addictive ?
T - Time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What’s the difference between a product being price elastic and price inelastic

A

Elastic - demand changes by a large extent to small change in price (price sensitive)
In elastic - demand changes by a small extent to a small change in price (price insensitive)
Larger than 1 = elastic
Smaller than 1 = inelastic

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What does a PED of 1 mean?

A

Unit price elastic

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What a PED of 0 mean?

A

Perfectly priced inelastic

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What does a PED of infinity mean?

A

Perfectly price elastic

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the definition of consumer surplus

A

The difference between the highest price consumers were willing to pay & the amount they actually pay

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is the definition of producer surplus

A

The difference between the lowest price the firm would have been willing to supply at and the actual amount that is paid

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Give 3 types of tax in UK
(Fiscal dividends = gov tax rev)

A

• income tax
• National insurance
• VAT
• corporation tax
• excise duties

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is an indirect tax

A

A tax on expenditure (spending)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is an Ad Valorem tax

A

A tax that increased relative to the price / amount (e.g. VAT)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is a specific/ unit tax

A

The amount of tax taken does not change no matter how much the amount is (e.g. excise duties)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Why does adding tax to goods cause a net welfare loss to society?

A

Because both consumer & producer surplus has been eroded (use diagram)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is a regressive tax

A

A tax that takes more of income as income falls

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is a progressive tax

A

A tax that takes more income as income rises

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is a proportional tax

A

A tax that takes the same amount of income regardless of level of income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Give 4 considerations when setting taxes

A

• setting the “right” tax rate is impossible
• cost of collection
• PED
• unintended consequences

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is a subsidy

A

A grant given by the government to encourage the production or consumption of a particular good/service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Give 2 reasons why a subsidy is put into a market

A

• encourage consumption
• encourage production (costs of production semi covered incentive)
• avoid unemployment (cover labour costs)
• increase international competitiveness

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is the definition of a private good

A

A good that, if consumed by one person, cannot be consumed by another

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
What is the definition of a public good
A good that, even if consumed by one person, can still be consumed by other people
26
What is a non-rivalry characteristic
Consumption of the good by one individual does not reduce the amount available to others (public good)
27
What a non-excludability characteristic
It is impossible (or at least very costly) to exclude other form benefiting from their use (public good)
28
What is a free rider
Someone who receives the benefit but allows others to pay for it This is why the gov tends to provide public goods - little incentive to pay for consumption so unprovided (issue is how many to provide?)
29
What is a merit good
A good that society believes everyone ought to have regardless of whether they are wanted by the individual (eg vaccines)
30
What is a demerit good
A good that society believes people ought NOT to have (eg tobacco, drugs) [controlled by laws, taxes & education]
31
What happens to merit goods in a free market mechanism
Under-provided as there is no incentive for businesses as it’s free of charge
32
When is there market failure
When markets do not function effectively or equitably (when free market mechanism doesn’t lead to perfect allocation) (divergence between MSB and MSC)
33
What are the 3 sources of market failure
1. Externalities 2. Under provision of public goods 3. Information gaps
34
What are the 2 ways markets fail
1. Over/ underproduction of goods (partial market failure) 2. Markets not existing, missing markets (complete market failure)
35
What is maximum price and when is it used
Line UNDER equilibrium Used if gov believes price is too high
36
What is minimum price and when is it used
Line ABOVE equilibrium Used to help producers increase incomes
37
What are the 3 methods of gov intervention
1. Indirect Taxation 2. Subsidies 3. Information provision
38
What is a tradable pollution permit
A limit on the amount of co2 emissions companies can emit each year (If price of co2 rises then companies will invest in reducing emissions - incentive)
39
What is an unintended consequence
When an intervention out in place by the government causes further issues in other markets as a response to the intervention
40
What is the equation for Average Costs
Total costs (TC) / output
41
What is the equation for Average Variable Costs
Total variable costs (TVC) / output
42
What is the equation for Average Fixed Costs
Total fixed costs (TFC) / output
43
What is the equation for Marginal cost and definition
The additional cost of producing one extra unit of output Change in TC / change in total output
44
Where does the MC curve pass through the AC curve ?
Midpoint
45
What is the definition for Marginal returns of labour
The addition to total output brought about by adding one more worker to the labour force
46
What is the equation for Average returns of labour
Total output / total no. Of workers
47
What is the definition of Increasing returns to scale
An increase in the scale of all FofP causes a more than proportionate increase in output (a faster rate) Constant = same proportion Decrease = less than proportionate
48
What is the definition of Economies of Scale
When a company grows in size and increases their output and their long run average costs of production fall (increasing returns to scale)
49
What is a monopoly
A market with only one firm (eg national grid, Royal Mail)
50
What are the 6 conditions needed for a market to be consider at Perfect Competition * 2 of the most important
1. Large no. of buyers & sellers * 2. Perfect market information 3. Ability to buy or sell as much as desired at ruling market price 4. Inability of a single buyer/seller to influence market price 5. Homogeneous product * 6. No barriers to entry/ exit in long run
51
What is a price maker (monopoly)
When a firm faces a downward sloping demand curve for its product, it posses the market power to set the price at which it sells the product
52
What is a quantity setter (monopoly)
When a firm faces a downward sloping demand curve for its product, it possesses the market power to set the quantity of the good it wishes to sell
53
What is a price taker (perfect competition)
A firm which is so small that is has to accept the ruling market clearing price If firm raises price, no sales If firm cuts it price, gains no advantage
54
What’s the difference between monopoly and perfect competition
• no competition - highly competitive • 1 firm - many firms • unique - homogenous • high share concentration - low share concentration
55
What is the equation for average revenue (AR)
AR = Total revenue / Quantity sold
56
What is the equation and definition for Marginal Revenue (MR)
The amount received from selling an extra unit of output MR = change in TR / change in Q
57
What happens to AR and MR in Perfect Competition
AR & MR = price Because there is only a change in output not price
58
What is the AR always equal to?
Price
59
What happens to MR in a Monopoly (when price falls as output increases )
MR decreased at twice the rate that AR (price) decreases by Because it’s taking double the changes in price
60
What does the pi symbol mean in economics
Profit
61
What are implicit costs
Opportunity costs
62
What are explicit costs
Actual fixed and variable costs of the business
63
What is the equation for economic profit
economic profit = accounting profit - implicit costs
64
What is the equation for accounting profit
TR - TC (just explicit)
65
When is profit called normal
When AR = AC - there is £0 economic profit
66
When is profit called supernormal/abnormal
When AR is greater than AC - more than £0 economic profit
67
When is profit called subnormal
When AR is less than AC - less than £0 economic profit
68
Where is profit maximisation on profit graphs
Where MC = MR
69
Where is Revenue maximisation on profit graph
Where MR = 0
70
Where is sales maximisation on profit graph
Where AC = AR
71
What is income
A flow of money going to factors of production (eg wages, salaries, interest from savings)
72
What is wealth
The current value of a stock of assets owned by someone or society as a whole (eg savings, shares, property)
73
What are positive statements
Objective & factual comments that can be tested & accepted/ rejected using evidence
74
What are normative statements
Subjective statements which carry value judgements (cannot be factually verified)
75
What is the economic problem
That resources are scarce and not allocated efficiently
76
What 3 things can expand a frontier
Changes in law Land expansion Increase in population (Quality and/or quantity of FofP)
77
What is the definition of specialisation
When production concentrated in a particular product or process

Economics A Level (AQA) (4 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions