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Strand 2 Flashcards

1
Q

Individual demand

A

Is the quantity demanded of a good or service by an individual consumers at different prices

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2
Q

Market demand

A

Is the total quantity of a good or service that would be demanded by all consumers in a market at different prices

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3
Q

Derived demand

A

It is the demand for a good, not for it’s own sake but for its use in the production other goods

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4
Q

Composite demand

A

It is when there is more than one use for a good. An increase in demand for one product can result in a fall in supply of another product

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5
Q

Joint demand

A

Complementary goods that are bought and sold together (consumed together)

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6
Q

Effective demand

A

Is demand that is supported by the necessary purchasing power. It refers to the willingness and ability of the consumer to purchase goods and services at different prices

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7
Q

Demand schedule

A

Is a table that gives the quantities of a good or service that would be demanded by consumers at different prices

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8
Q

The law of demand

A

States that as the price of a good or service falls, then the quantity demanded will rise. When the price of a good/service rises, then the quantity demanded will fall.
It’s the inverse relationship between price of a good/service and the quantity demanded

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9
Q

Movement of the demand curve

A

Is a change in quantity demanded at any price affected by a change in price

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10
Q

Shift of the demand curve

A

Is a change in quantity demanded at any price affected by any factor other than price

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11
Q

Normal good

A

Is a good, demand for which rises when income rises, and falls when income falls. Most goods are normal goods

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12
Q

Inferior good

A

Is a good, demand for which falls when income rises, and rises when income falls.

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13
Q

Substitutes

A

Goods that are alternatives for one another (they satisfy the same need)

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14
Q

Complements

A

Goods that are bought and sold together (joint demand). The purchase of one involves the purchase of other.

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15
Q

Factors of that cause a shift of the demand curve

A

price
income
substitute
complements
trends/advertising
Expectation
availability of credit

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16
Q

Individual supply

A

Is the quantity of a good or service supplied by individual suppliers at different prices

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17
Q

Market supply

A

Is the total quantity of a good or service supplied by all suppliers in the market at different prices

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18
Q

Supply schedule

A

Is a table that gives the quantities of goods/services that would be supplied by suppliers at different prices

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19
Q

Subsidy

A

Is a payment to a supplier that covers some of the supplier’s production cost

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20
Q

factors of that cause a shift of the supply curve

A

price
unplanned factors
substitute and complements
Advances in technology
Sumber of sellers
Government subsidies
Cost of production

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21
Q

Consumer surplus

A

Is the difference between what a consumer actually pays for a good/service and what they would be willing to pay, rather than do without the good/service

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22
Q

Producer surplus

A

is the difference between the price the seller would have accepted for a good/service and the price the seller actually receives

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23
Q

Law of supply

A

states that as the price for a good/service rises, then the quantity supplied will rise. When the price falls for a good/service, then the quantity supplied will falls. It is the positive relationship between price and quantity supplied

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24
Q

Equilibrium price

A

Is a point from which there is no tendency to change. Is the price that ensures that everything that is supplied is demanded. It ensures that’s there’s no excess supply (unsold stock) or excess demand (unsatisfied customer)

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25
Consumption or consumer spending
Generally refers to individuals buying consumer good/services
26
Utility
Refers to the benefit that an individual gets from consuming a good/service. Utility is measured in utils
27
Total utility
The total benefit that an individual get from consuming a number of units of a good/service
28
Marginal utility
The extra benefit that an individual gets from consuming an extra unit of a good/service △total utility ➗ △quantity
29
Consumer sentiment
Is a mathematical measure of the health of the economy as indicated by consumer opinion
30
Rational consumer
Is a logical or reasonable consumer. They are able to make purchasing decisions using intelligent thinking rather than emotion
31
Impulse purchase
Is purchase that is made on the spur of the moment that the consumer had not planned in advance
32
Economic good
Is any good that has utility to the consumer, is relatively scarce, so commands a price and is transferable
33
The Law of Diminishing Marginal Utility
states that as a consumers consumes more units of a good, the extra satisfaction (marginal utility) derived from each additional unit consumed will eventually decline
34
The Law of Equi-Marginal Returns
states that a consumer who want to maximise utility will allocate their limited income so that the ration of marginal utility to price (marginal utility per euro spent) is the same (equal) for all goods they consume MUa = MUb --------- --------- Pa = Pb
35
Price Elasticity of Demand (PED)
measure the percentage change in the quantity demand of a good/service as a result of percentage change in price △Q P1 + P2 ------ x ----------- △P Q1 + Q2
36
Relatively Elastic
percentage change in price is outweighed by the percentage change in quantity demanded ≥1
37
Relatively inelastic
percentage change in price outweights the percentage change in quantity demanded ≤1
38
Unitary Elastic
the percentage change in price is equal to the percentage in quantity demanded =1
39
Income Elasticity of Demand (YED)
measure the percentage change in the quantity demanded of a good/service in response to a percentage change in income
40
Explict Cost
monetary cost of production (expenses) that can be accounted for e.g wages
41
Implicit Cost
non-monetary cost that are not necessarily accounted for in the same way as explicit cost
42
Private Cost
are the cost borne by the individual who engages in an activity
43
Social Cost
are the total cost to society of an activity i.e private cost + external cost
44
short run
period of time in which at least one factor of production is fixed
45
long run
period of time in which all factors of production can be varied
46
fixed cost
are cost that *do not* vary with output/changes in production
47
variable cost
are cost that vary with output/changes in production
48
total cost
fixed cost + variable cost
49
marginal cost
is the extra cost of producing an extra unit of output △total cost --------------- △quantity
50
average fixed cost
the fixed cost per unit (fixed cost are spead over higher quantity) fixed cost -------------- quantity
51
average variable cost
the variable cost per unit variable cost ------------------ quantity
52
average total cost (ATC) or (AC)
the total cost per unit. deep u shape = short run/ shallow u shape = long run AC=AFC+AVC total cost ------------- quantity
53
The Law of Diminishing Marginal Returns (LDMR)
tells us that as increasing units of a variable factor of production are combined with a fixed amount of another factor of production, the extra output generated by the extra unit of the variable facotr of production eventually begins to diminish
54
Economies of scale
refers to the cost saving or lower cost per unit a firm enjoys when the output increase
55
Internal economies of scale
refers to the forces within a firm that results in a fall in the cost per unit as output rises, i.e as the firm expands
56
External economies of scale
refers to the forces within an industry that result in a fall in the cost per unit for all firms in the industry as the industry expands
57
Diseconomies of scale
refers to the cost disadvantages or higher cost per unit as the level of output produced increase
58
Internal diseconomies of scale
refres to forces within a firm that result in a rise in the cost per unit as a firm expands
59
External diseconomies of scale
refers to forces within an industry that result in a rise in the cost per unit as the industry expands
60
Moral Hazard
refers to the lack of an incentive as individual/firm has to guard against risk when they are protected from the consequence of their actions
61
total revenue (TR)
price x quantity
62
Marginal revenue (MR)
the extra revenue that is generated from supplying an extra unit of the good △total revenue --------------------- △quantity
63
Average reveune (AR)
this is the reveune per unit total revenue ------------------- quantity
64
Normal Profit
is the minimum profit a firm must make in order to continue in business in the long run. Is when AR = AC. To continue in business in the long run, the firm mist at least earn a normal profit
65
Supernormal (abnormal) profit
are profits that are earned that are in excess of normal profits . Is when AR is greater than AC
66
The profit-maximising rule
A profits-maximising firm will produce the quantity where MR = MC (and marginal cost is rising - cuts MR from below). The firm will not produce a quantity beyond the point where MR = MC.
67
Demerit good
is a good that can have negative effects on the consumer, and if it is over-consumed or over-produced it can impose negative external cost (externalities) on third parties
68
Externality
refers to the external cost (external benefit) that accrue to other individuals or to society as a result of production or consumption
69
Carbon tax
is a charge applied to carbon-emitting fuel such as coal, oil and natural gas
70
Price Ceiling
is a price below the equilibrium price. It is the price above which suppliers can't legally charge
71
Price floor
is a price that is above the equilibrum price. It's the price that suppliers are guaranteed

economics (4 decks)

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