ssss Flashcards
When is productive efficiency achieved?
This is achieved in an economy when it is not possible to make anyone better off without making someone worse off, you cannot produce more of one good A without producing less of good B.
What are the factors influencing PED
Necessity
Availibility of substitutes
Addiction
% of income spent on good
What is allocative efficiency?
It occurs when the available economic recources are used to produce the combination of goods and services that best matches peoples tastes and preferences.
What is producer surplus?
The difference between the price producers are willing and able to supply a good and the price they actually recieve.
What is the definition of a complementary product
A good which is consumed with another
What are the factors affecting the price elasticity of supply?
-Time
-Raw materials need to be found, extracted and processed.
-Availibility of stocks or stock-piling
-The ease of switching between alternative production
-availibility of spare capacity
-Ability to alter production methods
What is the definition of demand?
Demand is the amount that consumers are willing and able to buy at each given price point.
What are production possibility boundaries?
Indicates the maximum possible output that can be achieved given a fixed set of recources and tech in a particular time period.
When is demand income elastic
answers above 1 or less than 1
Define cross price elasticity of demand
A measure of the responsiveness of qunatity demanded of one good to a change in the price of another good.
What is producer surplus the measure of?
The measure of the welfare producers gain from producing goods and services.
What is consumer surplus?
The difference between the total amount that people are willing and able to pay for a good or service (demand curve) and the total amount they actually do pay (market price).
What is price elasticity of demand?
Measures the responsiveness of quantity demanded to a change in the price of the good
What is composite demand
A good that is demanded for more than one purpose so that an increase in demand for one purpose reduces the supply for the other purposes e.g. land
What is equilibrium?
The price at which demand is equal to supply and there is no tendency for change.
What are the determinants of supply - (things which shift supply).
-cost of raw materials
-technological improvements
-changes in labour productivity
-regulation and bereaucracy
-wage rates
-subsidies
-indirect taxes
-expectations about future prices
-objectives of firms
-number of sales in the market
-joint supply
What is disequilibrium in the long run?
The shortage returns to equilibrium
What is consumer surplus the measure of?
The measure of welfare (benefits) that people gain from consuming goods and services.
What are positive statements?
-Tested using evidence
-objective
-fact based
What is derived demand?
When the demand for one good or services comes from the demand for another good or service. That is, the good is a component of the other good.
What happens to total revenue when PED is elastic
a fall in price will increase total revenue
Describe what positive numbers mean for YED
the good is a normal good, the higher the number, the more luxurious the good
When PED is between 0 and -1
price inelastic demand
When prices fall, quantity demanded increases but at a smaller proportion than the fall in price.
What is economics the study of?
Economics is the study of the allocation of scarce recources within a society.
