The cost of one course of action expressed in terms of the next best alternative
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Production Possibility Frontier
Curve showing the maximum combination of goods and services that can be produced in a given period with available resources
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Positive Statement
A statement about what is
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Normative Statement
A statement about what ought to be
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Normal Good
One where the quantity demanded increases in response to an increase in consumer income
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Inferior good
One where the quantity demanded decrease in response to an increase in consumer incomes
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Substitutes
Two goods are said to be substitutes if the demand for one good is likely to rise if the price of the other good rises
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Complements
Two goods are said to be complements if increase in the price of one good cause the demand for the other good to fall
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Consumer Surplus
The value that consumer gain from consuming a good or service over and above the price paid
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Producer Surplus
The differece between the price received by firms for good or service and the price at which they would have been prepared to supply that good or service
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Indirect Tax
A tax levied an expenditure on goods or services
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Direct Tax
A tax charged directly to an individual based on a component of income
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Incidence of a Tax
The way in which the burden of paying a sale tax is divided between buyer and sellers
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Subsidy
A grant given by the government to producers to encourage production of a good or service
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Market Failure
A situation in which the free market mechanism does not lead to an optimal allocation of resources
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Externality
A cost or a benfit that is external to a market transaction, and is thus not reflected in market price
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Private Cost
A cost incurred by an individual as part of it's production or other economic activities
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External Cost
A cost that is associated with an individual's production or other economic activities, which is borne by a third party
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Private Good
A good that, once consumed by one person cannot be consumed by some body else such as good has excludability and is rivalrous
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Public Good
A good that is non-exclusive and non-rivalrous
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Merit Good
A good that brings unanticipated benefits to its consumers, such that society believes that it should be consumed by individuals regardless of whether they have the means or the willingness to do so
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Demerit Good
A good that brings less benefit to consume than they expect such that society believes that it should not be consumed by individuals regardless of whether they wish to do so
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Asymmetric Information
A situlation in which some participant in a market have better information about the conditions than others
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Buffer stock
Surplus stock that is bought up when the harvest is good with a view to selling when it is poor in an attempt to stabilize commodity price
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Other cards in this set
Card 2
Front
Curve showing the maximum combination of goods and services that can be produced in a given period with available resources
Back
Production Possibility Frontier
Card 3
Front
A statement about what is
Back
Card 4
Front
A statement about what ought to be
Back
Card 5
Front
One where the quantity demanded increases in response to an increase in consumer income
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