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the allocation of resources Flashcards

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1
Q

What is microeconomics?

A

The study of the behaviour and decisions of households and firms and the performance of individual markets.

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2
Q

What is macroeconomics?

A

The study of the whole economy.

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3
Q

Define market.

A

An arrangement which brings buyers into contact with sellers.

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4
Q

Who are economic agents?

A

Those people who undertake economic activities and make economic decisions.

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5
Q

What are economic systems?

A

The institutions, organisations and mechanisms that influence economic behaviour and determine how resources are allocated.

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6
Q

What characterizes a planned economic system?

A

The government makes crucial decisions, land and capital are state-owned, and directives allocate resources.

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7
Q

What is a mixed economic system?

A

An economy in which both the private and public sectors play an important role.

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8
Q

Define market economic system.

A

An economic system where consumers determine what is produced, resources are allocated by the price mechanism, and land and capital are privately owned.

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9
Q

What is the price mechanism?

A

The way the decisions made by households and firms interact to decide the allocation of resources.

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10
Q

What does capital-intensive mean?

A

The use of a high proportion of capital relative to labour.

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11
Q

What does labour-intensive mean?

A

The use of a high proportion of labour relative to capital.

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12
Q

What is market equilibrium?

A

A situation where demand and supply are equal at the current price.

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13
Q

What is market disequilibrium?

A

A situation where demand and supply are not equal at the current price.

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14
Q

Define demand.

A

The willingness and ability to buy a product.

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15
Q

What is market demand?

A

Total demand for a product.

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16
Q

What is aggregation in economics?

A

The addition of individual components to arrive at a total amount.

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17
Q

What is an extension in demand?

A

A rise in the quantity demanded caused by a fall in the product’s price.

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18
Q

What is contraction in demand?

A

A fall in the quantity demanded caused by a rise in the product’s price.

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19
Q

What are changes in demand?

A

Shifts in the demand curve.

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20
Q

What is an increase in demand?

A

A rise in demand at any given price, causing the demand curve to shift to the right.

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21
Q

What is a decrease in demand?

A

A fall in demand at any given price, causing the demand curve to shift to the left.

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22
Q

Define normal goods.

A

A product whose demand increases when income increases and decreases when income falls.

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23
Q

What are inferior goods?

A

A product whose demand decreases when income increases and increases when income falls.

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24
Q

Define substitute in economics.

A

A product that can be used in place of another.

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25
What is a complement?
A product that is used together with another product.
26
What does an ageing population refer to?
An increase in the average age of the population.
27
What is the birth rate?
The number of live births per thousand of the population in a year.
28
Define supply.
The willingness and ability to sell a product.
29
What is market supply?
Total supply of a product.
30
What is an extension in supply?
A rise in the quantity supplied caused by a rise in the product's price.
31
What is contraction in supply?
A fall in the quantity supplied caused by a fall in the product's price.
32
What are changes in supply?
Changes in supply conditions causing shifts in the supply curve.
33
What is an increase in supply?
A rise in supply at any given price, causing the supply curve to shift to the right.
34
What is a decrease in supply?
A fall in supply at any given price, causing the supply curve to shift to the left.
35
Define unit cost.
The average cost of production found by dividing the total cost by the output.
36
What are improvements in technology?
Advances in the quality of capital goods and methods of production.
37
What are direct taxes?
Taxes on the income and wealth of individuals and firms.
38
What are indirect taxes?
Taxes on goods and services.
39
What is a tax?
A payment to the government.
40
Define subsidy.
A payment by the government to encourage the production or consumption of a product.
41
What is equilibrium price?
The price where demand and supply are equal.
42
What is disequilibrium?
A situation where demand and supply are not equal.
43
What is excess supply?
The amount by which supply is greater than demand.
44
What is excess demand?
The amount by which demand is greater than supply.
45
What is price elasticity of demand (PED)?
A measure of the responsiveness of the quantity demanded to a change in price.
46
Define elastic demand.
When the quantity demanded changes by a greater percentage than the change in price.
47
What is inelastic demand?
When the quantity demanded changes by a smaller percentage than the change in price.
48
What is perfectly elastic demand?
When a change in price causes a complete change in the quantity demanded.
49
Define perfectly inelastic demand.
When a change in price has no effect on the quantity demanded.
50
What is unit elasticity of demand?
When a change in price causes an equal change in the quantity demanded, leaving total revenue unchanged.
51
What is price elasticity of supply (PES)?
A measure of the responsiveness of the quantity supplied to a change in price.
52
Define elastic supply.
When the quantity supplied changes by a greater percentage than the change in price.
53
What is inelastic supply?
When the quantity supplied changes by a smaller percentage than the change in price.
54
What is perfectly elastic supply?
When a change in price causes a complete change in the quantity supplied.
55
Define perfectly inelastic supply.
When a change in price has no effect on the quantity supplied.
56
What is unit elasticity of supply?
When a change in price causes an equal change in the quantity supplied.
57
What is the public sector?
The part of the economy controlled by the government.
58
What are state-owned enterprises (SOEs)?
Organisations owned by the government which sell products.
59
Define privatisation.
The sale of public assets to the private sector.
60
What is market failure?
Market forces resulting in an inefficient allocation of resources.
61
Who is a free rider?
Someone who consumes a good or service without paying for it.
62
Define allocative efficiency.
When resources are allocated to produce the right products in the right quantities.
63
What does productively efficient mean?
When products are produced at the lowest possible cost and make full use of resources.
64
What is dynamic efficiency?
Efficiency occurring over time as a result of investment and innovation.
65
Who are third parties in economics?
Those not directly involved in producing or consuming a product.
66
Define social benefits.
The total benefits to a society of an economic activity.
67
What are social costs?
The total costs to a society of an economic activity.
68
What are private benefits?
Benefits received by those directly consuming or producing a product.
69
Define private costs.
Costs made by those directly consuming or producing a product.
70
What are external benefits?
Benefits enjoyed by those who are not involved in the consumption and production activities of others directly.
71
What are external costs?
Costs imposed on those who are not involved in the consumption and production activities of others directly.
72
What is socially optimum output?
The level of output where social cost equals social benefit, and society's welfare is maximised.
73
Define merit goods.
Products the government considers consumers do not fully appreciate how beneficial they are and will be under-consumed if left to market forces.
74
What are demerit goods?
Products the government considers consumers do not fully appreciate how harmful they are and will be over-consumed if left to market forces.
75
What is a public good?
A non-rival and non-excludable product hence needs to be financed by taxation.
76
Define private goods.
A product which is both rival and excludable.
77
What is a monopoly?
A single seller.
78
What is price fixing?
When two or more firms agree to sell a product at the same price.
79
What is rationing?
A limit on the amount that can be consumed.
80
What is a lottery in economic terms?
The drawing of tickets to decide who will get the products.
81
What does nationalisation refer to?
Moving the ownership and control of an industry from the private sector to the government.
82
Define public corporation.
A business organisation owned by the government which is designed to act in the public interest.

economics (6 decks)

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