Unit 1 AoS 1 Flashcards
(21 cards)
Economics
Study of decisions made on how to use limited resources to produce GnS that help satisfy needs and wants»_space; improve current and future LS
Macroeconomics
Looks at workings of nation’s economy as a whol and factors affecting general wellbeing
Microeconomics
Looks at individuals decisions by firms and households and how it impacts markets of a particular GnS»_space; operations of smaller parts of the whole economy
Productive Capacity
Represents the pysical limit of a nation’s production level when all resources are used as eff as possible by gaining highest output (PPF)
Resource Allocation
Decisions about how scarce resources are to be ditributed among competing areas of production and which wants are satisfied
Decided through the market system and influenced by government decisions
Opportunity Cost
Value of production/consumption forgone in one area when limited resources are allocated to their next best alternative use
Cost-benefit analysis
Adding up anticipated costs of a decision vs benefits in the short and long term to minimise OC - used by decision makers like firms and gov
PPF
Represents nation’s potential output of GnS for a given year given efficient and complete use of available resources - all points are tech eff
Econ Efficiency
When there is max output gained from given volume of productive input»_space; affects PC and help’s maximise society’s general wellbeing and mat LS
Tech Efficiency
Whent here is max output with available input through lowest cost production methods and minimising resource wastage
Allocative Efficiency
Optimal distribution of GnS to max satisfy society’s N/W considering consumer values
Dynamic Efficiency
Relates to how quickly frms can reallocate resources in response to changing N/W of consumers
Intertemp Efficiency
Means optimal balance between allocating resources towards current consumption vs future use
Market
Decision-making institution where buyers and sellers exchange GnS and negotiate their relative prices - based on self-interest and competition
Supply/Demand
Quantity of GnS that sellers/consumers are willing to make available/purchase at any given price
Equilibrium
Natural situation towards which all free and comp markets tend to move. Exists only when quantity demand=supplied»_space; no glut or shortage as the market is cleared
Market Failure
When operation of the price system does not effectively allocate resources to maximise general satisfaction of society’s needs and wants
Asymmetric Info
When buyers or sellers lack complete information required to make rational decisions about resources (e.g. second hand car market, insurance market)
Externalities
Costs or benefits from EA passed onto 3rd party not involved in original activity (e.g. pollution, vaccination)
Public GnS
GnS available for all to use - non-excludable and non-rivalrous
Common Access Resources
Not owned by anyone with no price and is used without pay - non-excludable and rivalrous
