Unit 2 Flashcards
(135 cards)
1
Q
2.1 Willingness and ability of consumers to pay a sum of money for a good or service at a given price and at a given point in time.
A
Demand
2
Q
2.1 A good where there is a negative relationship between income and demand
A
Inferior good
3
Q
2.1 A good where a positive relationship between income and demand exists.
A
Normal good
4
Q
2.1 As household incomes increase, the demand for the good increases by a greater than proportionate rate relative to the rise in income.
A
Luxury good
5
Q
2.1 The total satisfaction measured in utils an individual derives from consuming successive units of a good.
A
Total utility
6
Q
2.1 As the price of a good falls, the quantity demanded rises partly because the good offers greater satisfaction to the consumer per unit of money spent compared to its substitutes.
A
Substitution effect
7
Q
2.1 As the price of a good changes quantity demanded changes because the amount of the good an individual can buy from their income changes.
A
Real income effect
8
Q
2.1 Where buyers and sellers interact and the price and quantity of the product traded are established.
A
Market
9
Q
2.1 There is an inverse causal relationship between the price of a good and the quantity demanded for it.
A
Law of demand
10
Q
2.1 A good that can be consumed together with another good.
A
complimentary good
11
Q
2.1 For each extra unit of a good consumed by an individual, the marginal utility they receive from consuming the good falls.
A
Law of diminishing marginal utility
12
Q
2.1 An alternative product that can be used to satisfy a similar want in place of a good.
A
Substitute good
13
Q
2.1 The satisfaction measured in utils an individual receives from the last unit of the good they consume.
A
Marginal utility
14
Q
2.1 As the price of a good or service rises, the quantity demanded falls and as the price of a good falls, the quantity demanded rises (ceteris paribus).
A
Law of demand
15
Q
2.1 As household incomes rise, demand for a good will increase, but at a less than proportionate rate than the increase in income.
A
Necessity good
16
Q
2.2 There is a positive causal relationship between the price of a good and the quantity supplied.
A
Law of supply
17
Q
2.2 The different products a firm could produce with its factors of production.
A
Competitive supply
18
Q
2.2 When a production process yields two or more goods at the same time.
A
Joint supply
19
Q
2.2 The willingness and ability of producers to offer a given quantity of a good for sale at a point in time and at a given price.
A
Supply
20
Q
2.3 The difference between the price the consumer is willing to pay for a good and the market price of that good.
A
Consumer surplus
20
Q
2.3 Where demand equals supply and the market-clearing price and output are established.
A
market equilibrium
20
Q
2.3 When the quantity of resources allocated to a market maximises the community or social surplus in that market.
A
Allocative efficicency
20
Q
2.3 How consumers act to maximise their utlity and producers react to maximise their profits when there is a change in price.
A
The incentive function of price
21
Q
2.3 The sum of the consumer surplus and producer surplus in a market.
A
Social surplus
22
2.3 The difference between the price the producer is willing to sell their good for and the market price of the good.
Producer surplus
23
2.3 This is where price distributes goods so there are no shortages or surpluses.
Rationing function of price
24
2.3 When a price changes in a market, it sends information to producers and consumers that market conditions are changing.
Signalling function of price
25
2.4 -HL- Where individuals simplify decision-making because they cannot work out the option that will give them the greatest utility.
Heuristics
26
2.4-HL-Where individuals make decisions that benefit other people as well as themselves.
Bounded selfishness
27
2.4-HL-The theory that individuals make a decision that offers them a ‘good enough’ outcome rather than an ‘optimal’ or utility-maximising outcome.
Bounded rationality
28
2.4-HL-The way an individual's decision-making is affected by information that comes easily into their mind.
Availability bias
29
2.4-HL-Where a business sets the layout, sequence, and range of choices available to a consumer in a particular way to encourage them to make a buying decision.
Choice architecture
30
2.4-HL-A reference point in an individual’s mind is based on the first piece of information an individual experiences which strongly influences their decision.
Anchoring bias
31
2.4-HL-Factors that influence individuals in decision-making situations and take them away from rational judgments.
Biases
32
2.4-HL-Where people try to maximise their utility from their available income.
Rational consumer income
33
2.4-HL-Where the consumer is forced to choose an option before they take part in an activity.
Mandated choice
34
2.4-HL-The way decisions made by individuals are affected by the choices presented to them.
Framing bias
35
2.4-HL-Where individuals consume beyond the point where they maximise their utility when consuming a good.
Bounded self-control
36
2.4-HL-Making small changes to the choice architecture encourages people to make decisions that will improve their own welfare and society’s welfare.
Nudge theory
37
2.4-HL-Business decision-making is guided by an entrepreneur’s desire to achieve the highest possible profit their firm can make from producing its goods and services.
Profit maximisation
38
2.4-HL-A set of business objectives based on environmental, ethical and social factors.
Corporate and social responsibility
39
2.4-HL-The percentage of total market revenue an individual firm's revenue accounts for.
Market share
40
2.4-HL-Where a business sets an aim that is satisfactory rather than optimal.
Satisficing
41
2.5-A change in the price of a good leads to a less than proportionate change in quantity demanded.
Price inelastic demand
41
2.5-The value of income a business receives from selling a good.
Revenue
42
2.5- The responsiveness of quantity demanded for a good to a change in its price.
Price elasticity of demand
43
2.5- A change in price leads to a proportionately greater change in quantity demanded.
Price elastic demand
44
2.5- For every 1% change in price, the quantity demanded changes by 1%.
Unitary elasticity
45
2.5-Graph that shows the relationship between income and demand.
The Engel curve
45
2.5- The responsiveness of quantity demanded to a change in household income.
Income elasticity of demand
46
2.6- For every 1% change in price, the quantity supplied changes by 1%
Unitary elasticity of supply
47
2.6- The responsiveness of the quantity supplied of a good to a change in its price.
Price elasticity of supply
48
2.6- A change in price leads to a proportionately greater change in quantity supplied.
Price elastic supply
49
2.6- A change in the price of a good leads to a less than proportionate change in quantity supplied.
Price inelastic supply
50
2.7- A that is tax added to the price of a good or service and collected by the firm selling the good or service and then paid to the government.
Indirect tax
50
2.7-A set money value of tax added to the price of a good.
Specific tax or duty
51
2.7- The amount of indirect tax the producer pays.
Producer incidence of tax
52
2.7-The amount of indirect tax the consumer pays.
Consumer incidence of tax
53
2.7-A fixed percentage tax added to the price of a good such as value-added tax (VAT).
Ad valorem tax
54
2.7-When there is an inefficient use of resources in a market.
Welfare loss
55
2.7- An amount of money paid by the government to producers to encourage the consumption and production of a good or service.
Subsidy
56
2.7- Where quantity demanded is greater than the quantity supplied at the maximum price.
Excess demand
57
2.7-A price set by a government or controlling authority to prevent the price of a good or service from rising above a fixed level.
Maximum price
58
2.7-Where quantity supplied is greater than quantity demanded in a market.
Excess supply
59
2.7-A lower limit set by the government or controlling authority to stop the price of a good or service from falling below a certain level.
Minimum price floor
60
2.8-Any impact that the production or consumption of a good or service has on a third party.
Externality
61
2.8-Spill-over benefits on third parties that occur as a result of the production of a good or service.
Production external benefits
62
2.8- When the output of a good or service means the social cost is greater than the social benefit.
Welfare loss
63
2.8- When third parties experience a cost from the consumption of a good or service
Consumption external cost
64
2.8- When the free market forces of demand and supply lead to an allocation of resources that does not maximise the welfare of a country’s citizens.
Market failure
65
2.8- The spillover costs that negatively impact third parties resulting from producing or consuming a good or service.
External cost
66
2.8-The spill-over costs on third parties that come from the production of a good or service.
Production external costs
67
2.8- The utility an individual receives from consuming a good or service.
Private benefits
68
2.8- The spillover benefits that positively impact third parties as a result of the consumption or production of a good or service.
External benefits
69
2.8-When a good or service is consumed there are spill-over benefits on third parties.
Consumption external benefits
70
2.8-The cost of raw materials, labour and capital used in producing a good or service.
Private costs
71
2.8- A good that society says people should not consume because their consumption is associated with significant social costs.
Demerit good
72
2.8-A good that society says people should consume because they are associated with significant social benefits.
Merit good
73
2.8-Where businesses are issued permits by the government which allow them to emit a certain amount of pollution.
Tradable permits (cap and trade schemes)
74
2.8-Requiring firms to meet certain laws and rules when they are producing goods and services.
Regulations
75
2.8-An amount of money paid by the government to producers to encourage the consumption and production of a good or service.
Subsidy
76
2.8- The use of common pool resources leads to a ‘shared-resource system’ where people over-produce goods using common pool resources.
The tragedy of the common
76
2.8-Government-owned and controlled organisations provide goods and services.
State provision
77
2.8-When an individual or a firm has ownership of a resource.
Property rights
78
2.8- The use of resources in the economy meets the needs of the present generation without adversely affecting the needs of future generations.
Sustainability
79
2.8- Natural resources that firms and individuals can access in society without restriction.
Common pool resources
80
2.8- Where local people work together to solve the environmental costs associated with the common pool resources rather than government regulations.
Collective self governance
81
2.8-Where the government sets specific limits on environmental pollution
Command and control regulation
82
2.8-The tax is levied on firms based on the amount of carbon they use to produce their goods or services.
Carbon tax
83
2.8- Consumption of a resource by one individual does reduce its availability to others.
Rivalrous
84
2.8-Natural resources that are impossible to limit access to.
Non-exculdable
85
2.9- The initial capital costs of starting production.
Set up costs
86
2.9-Once a public good is being produced it is impossible to stop people from benefiting from it.
Non-excludable
86
2.9-Goods that have some elements of being non-rivalrous and non-excludable.
Quasi-public goods
87
2.9-Have the characteristics of being non-rivalrous and non-excludable goods that cannot be provided by the free market.
Public goods
88
2.9-Because of non-excludability people benefit from a good/service without paying for it.
Free rider problem
89
2.9-The consumption by one individual does not reduce the availability to others.
Non-rivalrous
90
2.10-HL-An imbalance of information that exists between buyers and sellers in a market gives one side an unfair advantage in a transaction.
Asymmetric information
91
2.10-HL-When there is an incentive for people to change their behaviour because the negative consequences of their decisions are borne by others.
Moral hazzard
92
2.10-HL-Where one party in a transaction has better information than another on which to make their buying or selling decision.
Adverse selection
93
2.11-HL-The total cost of producing each unit of a good (TC / Q = ATC).
Average Total Cost (ATC)
94
2.11-HL-The opportunity cost that exists in every business decision-making situation.
Implicit cost
95
2.11-HL- The total output a firm can produce from a given quantity of labour and capital inputs
Total product (TP)
96
2.11-HL-The value of all costs of producing a good.
Total cost (TC)
97
2.11-HL-Business costs that firms incur in their operations are expressed in money terms.
Explicit costs
98
2.11-HL-The time period where all factors of production are variable.
The Long-run
99
2.11-HL-The change in TP when one extra unit of labour is added (ΔTP/Δ labour input).
Marginal product (MP)
100
2.11-HL-The output per unit of labour input (TP/ labour input)
Average product (AP)
101
2.11-HL-When a variable factor such as labour, is added to a given set of fixed factors, such as capital there is a point where the marginal product of the extra unit of variable factor added falls (diminishes).
Law of diminishing return
102
2.11-HL-Where at least one factor of production is fixed (normally capital) while other factors such as labour can be varied.
The short-run
103
2.11-HL-The total income a business receives
Total revenue (TR)
104
2.11-HL-The revenue per unit of output sold by a firm.
Average revenue (AR)
105
2.11-HL- The minimum profit firms need to earn to remain in a particular market.
Normal profit
106
2.11-HL-The market price is the price each firm in the perfect market has to charge.
Price takers
107
2.11-HL- All agents in the market know about the prices being charged by all the producers in the market.
Perfect knowledge
107
2.11-HL- When the entrepreneur does not make the minimum profit required to keep them in the market.
Losses
108
2.11-HL-The change in total revenue when one more unit of output is sold
Marginal Revenue
109
2.11-HL-Where marginal cost equals marginal revenue when marginal cost is rising.
Profit maximisation
110
2.11-HL-When the entrepreneur earns more than the minimum profit required to keep the firm in the industry
Abnormal profit
111
2.11-HL-When firms in the industry are producing where ATC equals MC and ATC is at its minimum.
Productive efficiency
112
2.11-HL-The change in total revenue when one more unit of output is sold
Marginal revenue
113
2.11-HL-When resources are allocated in a market where demand equals supply and the social/community surplus is maximised.
Allocative efficiency
114
2.11-HL-There are no differences between the goods and services supplied by different firms.
Homogenous products
115
2.11-HL- When one firm's output accounts for the total market supply of an industry.
Monpoly
116
2.11-HL-A restriction and/or cost of setting up in a market that is over and above the normal cost and or restrictions of entering a market.
Barrier to entry
117
2.11-HL-Where a firm's total revenue accounts for a high proportion of total market revenue.
Dominant producer monopoly
118
2.11-HL-A market that will tend to exist as a monopoly because the market cannot sustain more than one producer.
Natural monopoly
119
2.11-HL-That are slight differences in the products firms in the market sell.
Differentiated product
120
2.11-HL-A market with a large number of producers each selling a differentiated product.
Monopolistic competition
121
2.11-HL-Where firms compete with each other on factors other than price.
Non-price competition
122
2.11-HL-Prices do not change to reflect changes in relative scarcity.
Price rigidity
122
2.11-HL-The percentage of market revenue accounted for by a certain number of films.
Concentration ratio
123
2.11-HL-Where firms make decisions that influence price and output in a collusive way but do not involve a formal agreement.
Tacit collusion
124
2.11-HL-Decisions are based on how firms believe other firms in the market are going to react to their decisions.
Interdependent decision making
125
2.11-HL-
