AS Economics Microeconomics Key Terms

  • Created by: Richard98
  • Created on: 02-05-17 12:21
Ad valorem tax
A tax levied on a commodity set as a percentage of the selling price
1 of 89
Adverse selection
A situation in which a person at risk is more likely to take out insurance
2 of 89
Allocative efficiency
Achieved when consumer satisfaction is maximised
3 of 89
Asymmetric information
A situation in which some participants in a market have better information about market conditions than others
4 of 89
Average total cost (ATC)
Total cost divided by the quantity produced
5 of 89
Buffer stock
A scheme intended to stabilise the price of a commodity by buying excess supply in periods when supply is high, and selling when supply is low
6 of 89
A system of production in which there is private ownership of productive resources, and individuals are free to pursue their objectives with minimal interference from government
7 of 89
Centrally planned economy
Decisions on resource allocation are guided by the state
8 of 89
Ceteris paribus
A Latin phrase meaning 'other things being equal'; it is used in economics when we focus on changes in one variable while holding other influences constant
9 of 89
Comarative static analysis
Examines the effect on equilibrium of a change in the external conditions affecting a market
10 of 89
Competitive demand
Demand for goods that are in competition with each other
11 of 89
Competitive market
A market in which individual firms cannot influence the price of the good or service they are selling, because of competition from other firms
12 of 89
Competitive supply
A situation in which a firm can use its factors of production to produce alternative products
13 of 89
Two goods are said to be complements if people tend to consume them jointly, so that an increase in the price of one good causes the demand for the other good to fail
14 of 89
Composite demand
Demand for a good that has multiple uses
15 of 89
Composite supply
Where a product produced by a firm serves more than one market
16 of 89
Consumer surplus
The value that consumers gain from consuming a good or service over and above the price paid
17 of 89
Consumption externality
An externality that affects the consumption side of a makret which may be either positive or negative
18 of 89
Cost efficiency
The appropriate combination of inputs of facotrs of production, given the relative prices of those factors
19 of 89
Cross elasticity of demand
A measure of the sensitivity of quantity demanded of a good or service to change in the price of some other good or service.
20 of 89
The quantity of a good or service that consumers are willing and able to buy at any possible price in a given period
21 of 89
Demand curve
A graph showing how much of a good will be demanded by consumers at any given price
22 of 89
Demerit good
A good that brings less benefit to consumers than they expect, such that too much will be consumed by individuals in a free market
23 of 89
Derived demand
Demand for a factor of production or a good which derives not from the factor or the good itself, but from the goods it produces
24 of 89
Division of labour
A process whereby the production procedure is broken down into a sequence of stages, and workers are assigned to particular stages
25 of 89
Economic efficiency
A situation in which both productive efficiency and allocative efficiency have been reached
26 of 89
Economic growth
An expansion in the productive capacity of the economy
27 of 89
Economies of scale
Occurs for a firm when an increase in the scale of production leads to production at lower long-run average cost
28 of 89
A measure of the sensitivity of one variable to changes in another variable
29 of 89
Excess burden of a sales tax
The deadweight loss to society following the imposition of a sales tax
30 of 89
External cost
A cost that is associated with an individual's (a firm or household's) production or other economic activities, which is borne by a third party
31 of 89
A cost or a benefit that is external to a market transaction, and is thus not reflected in market prices
32 of 89
Factors of production
resources used in the production process, inputs into production, including labour, captial, land and entrepreneurship
33 of 89
An organisation that brings together factors of production in order to produce output
34 of 89
Fixed costs
Costs incurred by a firm that do not vary with the level of output
35 of 89
Free market economy
One in which resource allocation is guided by market forces without intervention by the state
36 of 89
Free-rider problem
When an individual cnnot be excluded from consuming a good, and thus has no incentive to pay for its provision
37 of 89
Government failure
A misallocation of resources arising from government intervention
38 of 89
Gross domestic product (GDP)
A measure of the economic activity carried out in an economy during a period
39 of 89
Incidence of a tax
The way in which the burden of paying a sales tax is divided between buyers and sellers
40 of 89
Income elasticity of demand (YED)
A measure of the sensitivity of quantity demanded to a change in consumer incomes
41 of 89
Indirect tax
A tax levied on expenditure on goods or services
42 of 89
Inferior good
One where the quantity demanded decreases in response to an increase in consumer incomes
43 of 89
Internalising an externality
An attempt to deal with an externality by ringing an external cost or benefit into the price system
44 of 89
Invisible hand
Term used by Adam Smith to describe the way in which resources are allocated in a market economy
45 of 89
Joint demand
Demand for goods which are interdependent, such that they are demanded together
46 of 89
Joint supply
Where a firm produces more than one product together
47 of 89
Law of demand
A law that states that there is an inverse relationship between quantity demanded and the price of a good or service ceteris paribus
48 of 89
The study of the interrelationships between economic variables at an aggregate level
49 of 89
Marginal cost (MC)
The coset of producing an additional unit of output
50 of 89
Marginal social benefit (MSB)
The additional benefit that society gains from consuming an extra unit of good
51 of 89
Marginal social cost (MSC)
The cost to socity of producing an extra unit of good
52 of 89
A set of arrangements that allows transactions to take place
53 of 89
Market economy
Market forces are allowed to guide the allocation of resources within a society
54 of 89
Market equilibrium
A situation that occurs in a market when the price is such that the quantity that consumers wish to buy is exactly balanced by the quantity that firms wish to supply
55 of 89
Market failure
A situation in which the free market mechanism does not lead to an optimal allocation of resources
56 of 89
Merit good
A good that brings unanticipated benefits to consumers, such that society believes it will be underconsumed in a free market
57 of 89
The study of economic decisions taken by individual economic agents, including households and firms
58 of 89
Minimum wage
A system designed to protect the low paid by setting a minimum wage rate that employers are permitted to offer workers
59 of 89
Mixed economy
Resources are allocated partly through price signals and partly on the basis of direction by government
60 of 89
A simplified representation of reality used to provide insight into economic decisions and events
61 of 89
Moral Hazard
A situation in which a person who has taken out insurance is prone to taking more risk
62 of 89
Normal good
One where the quantity demanded increases in response to an increase in consumer incomes
63 of 89
Normative statement
A statement involving a value judgement that is about what ought to be
64 of 89
Opportunity cost
In decision making, hte value of the next best alternative forgone
65 of 89
Pareto optimum
An allocation of resources is said to be a Pareto optimum if no reallocation of resources can make an individual better off without making some other individual worse off
66 of 89
Positive statement
A statement about what is, i.e. about facts
67 of 89
Price elasticity of demand (PED)
A measure of the sensitivity of quantity demanded to a change in the price of a good or service. It is measured as % change in quantity demand / % change in price
68 of 89
Price elasticity of supply (PES)
A measure of the sensitivity of quantity supplied of a good or service to a change in the price of that good or service
69 of 89
Private cost
A cost incurred by an individual (firm or consumer) as part of its production or other economic activities
70 of 89
Private good
A good that once consumed by on person, cannot be consumed by somebody else; such a good has excludability and is rivalrous
71 of 89
Producer surplus
The difference between the price received by firms for a good or service and the price at which they would have been prepared to supply that good or service
72 of 89
Production externality
An externality that affects the production side of a market, which may be either positive or negative
73 of 89
Production possibility curve
A curve showing the maximum combinations of goods or services that can be produced in a set period of time given available resources
74 of 89
Productive efficiency
Attained when a firm operates at minimum average total cost, choosing an appropriate combination of inputs (cost efficiency) and producing the maximum output possible from those inputs (technical efficiency)
75 of 89
An attempt to prevent the consumption of a demerit good by declaring it illegal
76 of 89
Public good
A good that is non-exclusive and non-rivalrous, consumers cannot be excluded from consuming the good, and consumption by one person does not affect the amount of good available for others to consume
77 of 89
Resource allocation
The way in which a society's productive assets are used amongst their alternative uses
78 of 89
A situation that arises because people have unlimited wants in the face of limited resources
79 of 89
Specific tax
A tax of a fixed amount imposed on purchases of a commodity
80 of 89
A grant given by the government to producers to encourage production of a good or service
81 of 89
Two goods are said to be substitutes if consumers regard them as alternatives, so that the demand for one good is likely to rise if the price of the other good rises
82 of 89
Sunk costs
Costs incurred by a firm that cannot be recovered if the firm ceases trading
83 of 89
Superior good
One for which the income elasticity of demand is positive, and greater than 1, such that as income rises, consumers spend proportionally more on the good
84 of 89
Supply curve
A graph showing the quantity supplied at any given price
85 of 89
Technical efficiency
Attaining the maximum possible output from a given set of inputs
86 of 89
Total cost (TC)
The sum of all costs that are incurred in producing a given level of output
87 of 89
Results when people seeking work at the going wage cannot find a job
88 of 89
Variable costs
Costs that vary with the level of output
89 of 89

Other cards in this set

Card 2


Adverse selection


A situation in which a person at risk is more likely to take out insurance

Card 3


Allocative efficiency


Preview of the front of card 3

Card 4


Asymmetric information


Preview of the front of card 4

Card 5


Average total cost (ATC)


Preview of the front of card 5
View more cards


No comments have yet been made

Similar Economics resources:

See all Economics resources »See all Key Terms resources »