AS Economics- F581 Defintions

these are just the defintions of all of the key terms needed for F581- markets in action paper. I used the definitons from the OCR approved texted book!!! :)

HideShow resource information
  • Created by: lydia
  • Created on: 10-03-14 18:02
Market Failure
When the free market mechanism fails to achieve economic efficiency.
1 of 69
Product efficiency
where production takes place using the least amount of scare resources.
2 of 69
Economic efficiency
where both allocative and productive efficiency are achieved.
3 of 69
Inefficiency
any situation where economic efficiency is not achieved.
4 of 69
Free market mechanism
the system by which the market forces of demand and supply determine prices and the decision made by the consumers and firms.
5 of 69
Information failure
a lack of information resulting in consumers and producers making decisions that do not maximise welfare.
6 of 69
Externality
an effect whereby those not directly involved in taking a decision are affected by the action of others.
7 of 69
Private cost
the costs incurred by those taking a particular action.
8 of 69
Private benefits
the benefits directly accruing to those taking a particular action.
9 of 69
External cost
the costs that are the consequence of externalities to third parties.
10 of 69
External benefits
the benefits that accrue as a consequence of externalities to third parties.
11 of 69
Social cost
the total costs of a particular action.
12 of 69
Social benefits
the total benefits of a particular action.
13 of 69
Negative externalities
this exists where the social cost of an activity is greater than the private cost.
14 of 69
Positive externalities
this exists where the social benefit of an activity exceeds the private benefit.
15 of 69
Merit goods
these have more private benefits than their consumers actually realise.
16 of 69
Demerit Good
their consumption is more harmful then is actually realised.
17 of 69
Public goods
goods that are collectively consumed and have the characteristic of non-exclude and non-rivalry.
18 of 69
Non-excludability
situation existing where individual consumers cannot be excluded from consumption.
19 of 69
Free- rider
someone who directly benefits from the consumption of a public good but doesn’t contribute towards its provision.
20 of 69
Non- rivalry
situation existing where consumption by one person does not affect the consumption of all others.
21 of 69
Quasi-public goods
goods having some but not all of the characteristics of a public good.
22 of 69
In- kind transfers
benefits in GOODS to those who need it.
23 of 69
Income transfers
benefits in CASH to those who need it.
24 of 69
Regulation
rules written to regulate economic behaviour, backed up by legalisations.
25 of 69
Direct taxes
one that taxes the income of people and firms and cannot be avoided.
26 of 69
Indirect taxes
a tax levied on goods and services.
27 of 69
Polluter pays principle
any measure, such as a green tax where by the polluter pays explicitly for the pollution caused.
28 of 69
Subsidy
a payment, usually form the government, to encourage production or consumption.
29 of 69
Trade permit
a permit that allows the owner to emit a certain amount of pollution and that, if unused or only partially used, can be sold to another polluter.
30 of 69
Demand
the quantity of a product that consumers are able and willing to purchase at various prices over a period of time.
31 of 69
Normative demand
the desire for a product.
32 of 69
Effective demand
The willingness and ability to buy a product.
33 of 69
Ceteris paribus
assuming other variables remain unchanged.
34 of 69
Consumer surplus
the extra amount that a consumer is willing to pay for a product above the price that is actually paid.
35 of 69
Total expenditure
price x quantity demanded.
36 of 69
Real disposable income
income after taxes on income has been deducted and state benefits have been added.
37 of 69
Normal goods
goods for which an increase in income leads to an increase in demand.
38 of 69
Inferior goods
goods for which an increase in income leads to a fall in demand.
39 of 69
Complements
goods for which there is a joint demand.
40 of 69
Supply
the quantity of a product that producers are willing and able to provide at different market prices over a period of time.
41 of 69
Producer surplus
the difference between the price a producer is willing to accept and what is actually paid.
42 of 69
Land
natural resources in the economy.
43 of 69
Labour
the quantity and quality of human resources.
44 of 69
Capital
man-made aids to production.
45 of 69
Entrepreneurship
the willingness of an entrepreneur to take risks and organise production.
46 of 69
Finite
limited E.g. fossil flues, land.
47 of 69
Infinite
never ending and unlimited E.g. wants.
48 of 69
Wants
anything you would like, irrespective of whether you have the resources to purchase it.
49 of 69
Scarcity
a situation where there are insufficient resources to meet all wants.
50 of 69
Choice
the selection of appropriate alternatives.
51 of 69
Opportunity Cost
the cost of the forgone alternative.
52 of 69
Specialisation
the concentration by a worker or workers, firm, region or whole economy on a narrow range of goods and services.
53 of 69
Absolute advantage
when a product is produced by an economy at a cheaper and better quality than another economy.
54 of 69
Comparative advantage
One country has a marginal advantage over the other.
55 of 69
Market economy
an economic system whereby resources are allocated though the market forces of demand and supply.
56 of 69
Command (centrally planned) economy
an economic system in which resources are state owned and also allocated centrally.
57 of 69
Mixed economy
an economic system whereby resources are allocated though the free market mechanism.
58 of 69
Price elasticity of supply(PES)
the responsiveness’s of the quantity supplied to a change in the price of the product. OR % change in quantity supplied/%change in price.
59 of 69
Elasticity
the extent to which buyers and sellers respond to a change in market conditions.
60 of 69
Price elasticity of demand(PED)
the responsiveness of quantity demanded to change in the price of the product. OR, %change in QD/ % change in P.
61 of 69
Price elastic
where the %chnage in the quantity demanded is sensitive to a change in price.
62 of 69
Price inelastic
where % change in quantity demanded is insensitive to a change in price.
63 of 69
Income elasticity of demand (YED)
the responsiveness of demand to a change in income. OR, % change in QD/% change in Y.
64 of 69
Normal goods
goods with a positive income elasticty of demand.
65 of 69
Income elastic
goods for which a change in income produces a less than propotionate chnage in demand.
66 of 69
Income elastic
goods for which a change in income produces a greater proportionate change in demand.
67 of 69
Inferior good
goods for which an increase in income leads to a fall in demand.
68 of 69
Cross elasticity of demand (XED)
the responsiveness of demand for one product in relation to a change in the price of another product.OR, % change in product A/ % change in product B
69 of 69

Other cards in this set

Card 2

Front

where production takes place using the least amount of scare resources.

Back

Product efficiency

Card 3

Front

where both allocative and productive efficiency are achieved.

Back

Preview of the back of card 3

Card 4

Front

any situation where economic efficiency is not achieved.

Back

Preview of the back of card 4

Card 5

Front

the system by which the market forces of demand and supply determine prices and the decision made by the consumers and firms.

Back

Preview of the back of card 5
View more cards

Comments

No comments have yet been made

Similar Economics resources:

See all Economics resources »See all All aspects of the paper resources »