tiny Flashcards
(105 cards)
1
Q
economics
A
the science that studies human behaviour as a relationship between needs and scarce resources which have alternative uses
2
Q
microeconomics
A
the study of the behaviour of individual consumers and firms, and the determination of market P and Q of g&s and FoP
3
Q
production possibility curve
A
show all max combo of g&s that can be produced by an econ in a given period of time when all resources are fully and efficiently utilised
ceteris paribus: state of tech is fixed
show potential output
4
Q
scarcity
A
problem that arises when we want more than we have
5
Q
opportunity cost
A
highest-valued option forgone
6
Q
what to produce
A
choice of the types and quantities of g&s to produce
7
Q
how to produce
A
choice of production methods
8
Q
for whom to produce
A
who can enjoy how much of g&s
9
Q
firms
A
the productive units in the econ that turn FoP into g&s
10
Q
income
A
flow of earnings from using labour to produce g&s
wages and salaries are the factor reward to labour
11
Q
circular flow
A
visualise and understand how a nation’s overall econ works and how the flow of money goes
12
Q
injections
A
money flows pumped into the econ
13
Q
leakages
A
money flows leaked out of the econ
14
Q
investment
A
the expenditure by firms on capital to produce more g&s
15
Q
ceteris paribus
A
keeping all other factors equal
16
Q
primary commodities
A
raw materials that are produced in the primary sector
17
Q
primary sector
A
extracts or harvests products directly from natural resources in order to produce raw materials or food
18
Q
consumption
A
spending by households on consumer g&s over a period of time
19
Q
factors of production
A
the 4 resources that allow an economy to produce its output: land, labour, capital and entrepreneurship
20
Q
capital
A
the FoP that comes from investment in physical and human capital
21
Q
human capital
A
skills, abilities, knowledge and good levels of health of labour
22
Q
entrepreneurship
A
the FoP involving organising and risk-taking
recognising the possibility of gain from employing a combination of other FoPs in a specific way
23
Q
labour
A
the human FoP
the physical and mental contribution of the existing work force to production
24
Q
land
A
the physical FoP
consists of natural resources, some of which are renewable and some of which are non-renewable
25
taste
the subjective, individual preferences of consumers
26
demand
various planned Q a consumer is willing and able to buy at different possible P in a period of time, ceteris paribus
27
quantity demanded
Q of a g&s a consumer is willing & able to buy at a particular P
28
law of demand
when P increases, Qd decreases, vice versa, ceteris paribus
29
supply
various planned quantities a producer is willing & able to produce & supply to market at different possible price in a period of time, ceteris paribus
30
quantity supplied
Q of a g&s a producer is willing & able to produce and supply at a particular P
31
law of supply
when P increases, Qs increases, vice versa, ceteris paribus
32
market equilibrium
no tendency to change
Pe: Qs = Qd
Qe: Q at Pe
33
quantity transacted
actual Q bought & sold
34
substitutes
g&s that can replace each other to satisfy the same/similar need
35
complements
g&s that tend to be used together to satisfy a particular want
36
competitive supply
compete for use of same resources
producing one implies decrease in other
supply
37
joint supply
produced in same production process
| not possible to produce more of one without producing more of other
38
inferior g&s
g&s where demand falls as income increases
| more affordable substitutes for more expensive g&s
39
normal/superior g&s
g&s where demand increases as income increases
| luxury g&s not deemed a necessity for living
40
supply shocks
sudden and unpredictable events that affect supply
| can be beneficial/adverse
41
price mechanism
the process by which P increase or decrease as a result of changes in D and S
coordinates consumption and production decisions as an invisible hand
42
shortage
excess D
| Qd >>> Qs
43
surplus
excess S
| Qd <<< Qs
44
market
where producers and consumers take place to exchange g&s
45
competitive market
a market with many individual and small sellers and buyers
no one in the market have the power to influence P of g&s
P affected by D and S
46
marginal benefit
extra benefit from consuming additional unit of good
| downward-sloping bc consumers are willing to pay less for each additional unit
47
law of diminishing marginal return
MB decreases as consumers are willing to pay less for each additional unit
48
consumer surplus
pos diff between maximum amount willing to pay and amount actually paid
49
marginal cost
firms’ extra cost of producing additional unit of g&s
| upward-sloping because each unit more costly than the last
50
producer surplus
positive difference between amount actually received and minimum amount willing to accept
51
social surplus
CS + PS
52
allocative efficiency
achieved when market allocates resources so no one can be better off without making someone else worse off
MB = MC
53
allocative inefficiency
MB > MC: underproduction
MB < MC: overproduction
welfare loss exist
54
welfare loss
loss of SS in society when resources are not allocated efficiently
55
price elasticity of demand
measures the responsiveness of Qd to a change in its P
| % change in Qd/% change in P
56
price elasticity of supply
measures the responsiveness of Qs to a change in its P
| % change in Qs/% change in P
57
perfectly elastic demand
an increase in the P of a g&s leads to a fall in the Qd of the g&s to zero
infinity
58
perfectly elastic supply
a fall in the P of a g&s leads to a fall in the Qs of the g&s to zero
infinity
59
perfectly inelastic demand
a change in the P of a g&s leads to no change in the Qd of the g&s
0
60
perfectly inelastic supply
a change in the P of a g&s leads to no change in the Qs of the g&s
0
61
income elasticity of demand
a measure of the responsiveness of the D for a g&s to a change in income
62
unitary elastic demand
a change in the P of a g&s leads to an equal and opposite proportional change in the Qd of the g&s
1
63
unitary elastic supply
a change in the P of a g&s leads to an equal proportional change in the Qs of the g&s
1
64
benefit/utility
satisfaction of a consumer from consuming a g&s
65
free market
P of g&s freely determined by D and S
66
government intervention
any action carried out by gov that affects market econ with the objective of impacting consumption and production decisions
67
total revenue
the aggregate revenue gained by a firm from the sale of a particular Q of output
P x Qt
68
price control
the setting of market P by gov so P are unable to adjust back to their problematic equilibrium level determined by D and S
69
price ceiling
legal maximum price set by the gov below the equilibrium price that producers can charge on a g&s
70
price floor
legal minimum price set by the government above the equilibrium price that producers should charge on a g&s
71
unit tax
a specific amount of tax is imposed on each unit of a g&s
72
indirect taxes
taxes on spending on g&s paid partly & indirectly by consumers but paid to gov by producers
suppliers can shift tax burden to consumers by ↑ P
73
subsidy
financial assistance from the government
74
market failure
failure of the market to allocate resources efficiently
75
socially-optimum outcome
no externalities
MPB = MPC and MSB = MSC
no difference between benefits to consumers and to society and costs to producers and to society
allocative efficiency achieved
76
externality
consumption or production that gives rise to pos or neg effects on others whose interests are not taken into consideration
77
negative externality
action exerts negative effects known as external cost on third parties but no compensation is paid
divergence between private and social cost
78
positive externality
action exerts positive effects known as external benefits on third parties but no payment received
divergence between private and social benefit
79
demerit good
g&s considered to be undesirable to consumers
| over-provided by free market
80
negative externalities of consumption
external cost created by consumers in consumption process of g&s that result in negative effect on third parties
81
negative externalities of production
external cost created by producers in production process
82
merit good
g&s considered to be desirable by consumers
| under-provided by free market
83
positive externalities of consumption
external benefit created by consumers in consumption process of g&s that result in positive effect on third parties
84
positive externalities of production
external benefit created by producers in production process
85
marginal private cost
cost to producers of producing 1 more unit of g&s
86
marginal social cost
cost to society of producing 1 more unit of g&s
87
marginal private benefit
benefit to consumers from consuming 1 more unit of g&s
88
marginal social benefit
benefit to society from consuming 1 more unit of g&s
89
private cost
cost borne by economic agents taking action
90
external cost
cost borne by other economic agents (non-decision makers)
91
social cost
cost borne by society as a whole
92
carbon tax
tax per unit of carbon emissions
93
tradable permits
policy involving permits to pollute issued to firms by the government
94
government regulation
used to limit consumption or production activities
95
education
used to persuade and inform consumers by raising awareness thru advertising and education
96
common access resources
resources that unowned by anyone
| available for anyone to use without payment
97
sustainability
needs of the present are met without decreasing the ability of future generations to meet their own needs
98
rivalrous
one’s consumption of g&s reduce amount available for others
99
non-excludable
not possible to exclude people from using resource
| used abundantly without restriction → resources overused, degraded and depleted
100
excludable
can prevent people from consuming the g&s once it has been produced
usually done by charging a price for the g&s
101
tragedy of commons
occurs in shared-resource system where individual users act independently according to own self-interest
102
public good
non-rivalrous & non-excludable in consumption
103
private good
rivalrous and excludable in consumption
104
impure public good
non-rivalrous and excludable in consumption
105
free-rider problem
once the g&s are produced, consumers who have not paid can still enjoy the benefits of public g&s
