Theme 1 Flashcards
(13 cards)
What is a mortgage?
A loan to buy a property secured by the property itself.
What are variable interest rates?
A mortgage where the repayments change according to the interest rate set by the Bank of England.
What are fixed interest rates?
A mortgage where the repayments do not change according to the interest rate set by the Bank of England.
Who is a rational consumer?
A person who weighs up the costs and benefits of each additional unit of a good purchased.
What is rational decision making?
The process where consumers allocate their expenditure to maximize utility and producers allocate resources to maximize profits.
What is total utility?
The total satisfaction a consumer gets from consuming all units of a good within a given time period.
What is marginal utility?
The utility or extra satisfaction gained from consuming one extra unit of a good.
What is diminishing marginal utility?
As more units of a good are consumed, additional units provide less additional satisfaction than previous units.
What is the price mechanism?
The mechanism through which price is determined in a free market system.
What is government failure?
Government intervention leading to inefficient or misallocation of resources and welfare loss.
Fill in the blank: A mortgage is a _______.
secured loan.
True or False: Fixed interest rates change according to the Bank of England’s interest rate.
False.
Fill in the blank: Marginal utility decreases as more units of a good are _______.
consumed.
