Unit 1 - Micro

Question 0

Free good

Answer 0

Goods which are unlimited in supply and which therefore have no opportunity cost

Question 1

Utility

Answer 1

Satisfaction derived from consuming a good

Question 2

Economic good

Answer 2

Goods that are scarce because their use has an opportunity cost

Question 3

Scarcity

Answer 3

Economic agents can only obtain a limited amount of resources at any moment in time

Question 4

Opportunity cost

Answer 4

Economic cost of production, benefit lost from the next best alternitive

Question 5

Production possibility frontier

Answer 5

Curve which shows the maximum potential level of output of one good given a level of output for all other goods in the economy

Question 6

Factors of production

Answer 6

Land
Labour
Capital

Question 7

Externalities

Answer 7

When the consumption/production of a good has a third party effects

Question 8

Merit good

Answer 8

Good which is under-provide by the market mechanism and has positive externalities

Question 9

Public good

Answer 9

Good where consumption by one person does not reduce the amount available for consumption by another person i.e. Non-excludable and non-rivalry

Question 10

What is the problem with a public good

Answer 10

It leads to a free-rider problem

Question 11

Free market economy

Answer 11

An economic system which resolves the basic economic problem through the market mechanism

Question 12

Normal good

Answer 12

Good where demand increases when income increases (YED>0)

Question 13

Inferior good

Answer 13

Good where demand falls with an increase In income (YED<0)

Question 14

Law of diminishing returns

Answer 14

If increasing quantities of a variable input are combined with a fixed input,eventually the marginal product and the average product of that variable input will decline

Question 15

Factors effecting PED

Answer 15

Number of substitutes 
Cost of switching between products
Degree of necessity 
Proportion of income
Time period
Addictive

Question 16

Factors effecting PES

Answer 16

Spare capacity
Remaining stocks
Ease/cost of factor substitution/mobility
Time period

Question 17

Income elasticity of demand (YED) types

Answer 17

0>YED - inferior good

0

Question 18

Types of XED

Answer 18

0>YED - complimentary good

0

Question 19

Government failure

Answer 19

When the government intervenes in the economy to correct market failure creating an inefficiency leading to misallocation of resources

Question 20

Market failure

Answer 20

Where resources are inefficiently due to imperfections in the working of the market mechanism

Question 21

Where does the burden for a tax

Answer 21

Top is paid by the producer

The bottom is paid by the comsmer

Question 22

What does a tax shift

Answer 22

The tax shifts the supply right

Question 23

Types of tax

Answer 23

Specific tax: ax per unit and is a fixed amount ie duty on cigarettes
Ad velorum: this is a percentage of the cost of supply

Question 24

What does regressive mean

Answer 24

It effect the poor worse that the rich

Question 25

Top burden for tax and subsidies

Answer 25

Tax - consumer is top

Subsidy - producer is top