surpluses,eos,subsidies,taxes,externalities

Question 1

what is equilibrium

Answer 1

when demand=supply

Question 2

what is disequilibrium

Answer 2

When there is excess supply so companies have to dec price to sell more and get rid of the excess supply

Question 3

what is price mechanism

Answer 3

The use of market forces to allocate resources in order to solve the economic problem of what, how, and for whom to produce.

The interaction of demand and supply to determine the market clearing price.

Question 4

what is the abbreviation to remember the functions of price mechanisms

Answer 4

ARSI

Question 5

what does the A in ARSI stand for

Answer 5

allocate scarce resources

Question 6

what does the R in ARSI stand for

Answer 6

Ration excess demand/supply

Question 7

what does the S in ARSI stand for

Answer 7

signals that the price is too high/low

Question 8

what does the I in ARSI stand for

Answer 8

incentive to change price and inc profit

Question 9

who was the famous scientist and what did he refer to supply and demand as

Answer 9

Adam Smith, the invisible hand (guiding prices and output/quantities to an equilibrium

Question 10

what is joint demand

Answer 10

(Complementary goods) are goods which tend to be demanded together

Question 11

what is joint supply

Answer 11

When the production of one good leads to the prod of another good

Question 12

what is derived demand

Answer 12

When a particular good or fop is necessary for the provision of another good or service

Question 13

what is production

Answer 13

converting inputs into outputs

Question 14

what is productivity

Answer 14

Output per factor employed

Question 15

what is short run

Answer 15

When at least one of the fops is fixed (usually capital)

Question 16

what is long run

Answer 16

When all of the fops can vary/change

Question 17

what are variable costs

Answer 17

costs that vary with the quantity of output produced

Question 18

what are fixed costs

Answer 18

Expenses that do not change, regardless of production or sales volume.

Question 19

what are average costs

Answer 19

Total costs / output (cost too produce one unit of something)

Question 20

what is consumer surplus

Answer 20

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

Question 21

What is consumer surplus essentially a measure of?

Answer 21

consumer welfare

Question 22

what is producer surplus

Answer 22

The difference between the price a producer receives and what they would have been willing to supply it at

Question 23

On a graph, where is consumer surplus shown

Answer 23

above price, below demand

Question 24

On a graph where is producer surplus shown

Answer 24

below price above supply

Question 25

what is the abbreviation for factors affecting EOS

Answer 25

really fun mums try making pies

Question 26

what does the R stand for in RFMTMP

Answer 26

Risk bearing,spreading the risk and opportunity cost

Question 27

what does the f stand for in RFMTMP

Answer 27

Financial,negotiating lower rates of interest, banks more likely to lend money

Question 28

what does the M stand for in RFMTMP

Answer 28

Managerial,employing managers for their skills and to assess productivity

Question 29

what does the T stand for in RFMTMP

Answer 29

Technical,better machinery inc productivity

Question 30

what does the 2ND M stand for in RFMTMP

Answer 30

Marketing,bulk buying ads (it's a fixed cost so lower cost per unit)

Question 31

what does the P stand for in RFMTMP

Answer 31

Purchasing,firms buying material in bulk and bargaining

Question 32

what do all factors of EOS link to

Answer 32

Total cost inc,but quantity inc faster so lower average cost

Question 33

what are diseconomies of scale

Answer 33

when a company or business grows so large that the costs per unit increase

Question 34

what can we link DEOS to

Answer 34

Total cost increase fast whilst quantity doesn't

Question 35

what is a subsidy

Answer 35

A government payment that supports a business or market to encourage investment

Question 36

what does a subsidy do

Answer 36

Reduces the COP which leads to lower prices and higher quantity demanded and supplies so consumer surplus inc

Question 37

what is indirect tax

Answer 37

A charge/levy imposed on the price of a product or service

Question 38

what does an indirect tax graph show

Answer 38

Shows that tax disproportionately burdens consumers which could be described a inequitable and regressive as it will hurt lower income customers

Question 39

Is an indirect tax graph normally Inelastic or elastic an what does this mean

Answer 39

Usually Inelastic meaning it's more unresponsive as the tax inc lots but quantity doesn't dec

Question 40

what is progressive tax

Answer 40

the higher your income the more tax you pay

Question 41

what is regressive tax

Answer 41

Takes a bigger chunk of money from people so hurts them more

Question 42

what is market failure

Answer 42

Failure to allocate scarce resources effectively

Question 43

what is an externality

Answer 43

third party effect

Question 44

what is a negative externality

Answer 44

the harm, cost, or inconvenience suffered by a third party because of actions by others (social costs>private costs)

Question 45

what is social cost

Answer 45

cost to society

Question 46

what is the formula for social cost

Answer 46

Private cost+external cost(neg externality)

Question 47

where is socially optimum on the graph

Answer 47

Where MSB=MSC (top of triangle)

Question 48

what are demerit goods

Answer 48

Harmful to/bad for consumers and their consumption cause negative externalities

Question 49

what are merit goods

Answer 49

-good for consumers and generate positive externalities

Question 50

what are positive externalities

Answer 50

Benefits to third parties as a result of the actions of production