paper 1 Flashcards
(25 cards)
Demand
the quantity of a good that consumers are willing and able to purchase at various prices during a given period of time
PED
a measure that captures the responsiveness of a good’s quantity demanded to a change in its price
%change in QD/ % change in Price
YED
measures the responsiveness of demand to a change in income
% change QD/ % change in income
CED
evaluates the relationship between two products when the price in one of them changes.
% change in quantity demanded for Product A / % change in price of product B.
Supply
the total amount of a specific good or service that is available to consumers
PES
the measure of the responsiveness of the quantity supplied of a particular good to a change in price
% Change in QS / % Change in Price
Market Failure
an inefficient distribution of goods and services in the free market
Externalities
an indirect cost or benefit to an uninvolved third party that arises as an effect of another party’s activity
Positive Externality
benefits a third party not directly involved in the market transaction. - eg, education. benefits the whole of society.
Negative Externality
the cost that a third party suffers as a consequence of an economic transaction. eg- sale of alcohol causing a drunk driving accident
Public Goods
a commodity or service that is made available to all members of a society
Asymmetric Information
when one party in a transaction is in possession of more information than the other
Government Failure
when government intervention in the economy causes an inefficient allocation of resources and a decline in economic welfare
Organic Growth
expansion from within a business.
External Growth
growth of a company from outside its existing resources. eg - merger, takeover.
Conglomerate
a firm or business enterprise having different economic activities in different unrelated industries
Horizontal Integration
when one company acquires or merges with another that operates at the same level in an industry.
Vertical Integration
the merging together of two businesses that are at different stages of production. eg - a food manufacturer and a chain of supermarkets
EoS
the cost advantage experienced by a firm when it increases its level of output
DoS
when a company or business grows so large that the costs per unit increase
Normal Profit
when a firm makes sufficient revenue to cover its total costs and remain competitive in an industry.
SNP
the excess profit a firm makes above the minimum return necessary to keep a firm in business
Allocative Efficiency
when consumer demand is completely met by supply, without waste.
Productive Efficiency
producing the largest possible output from the available resources in an economy
