eco unit 1 definitions
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- Created by: hu
- Created on: 09-01-13 18:13
basic economic problem
resources have to be allocated between competing uses because wants are infinite while resources are scarce.
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economic goods
good which are scarce because their use has an opportunity cost
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Free goods
goods which are unlimited in supply and which therefore have no opportunity cost.
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opportunity cost
the benifits forgone of the next best alternative
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PPF
shows the maximum potential level of output for two goods or services that an economy can achieve when all its resources are fully and efficiently employed
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division of labour
specialization by workers
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factors of production
Land Labour Capital and Enterprise
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Fixed capital
economic resources such as factories and hospitals which are used to transform working capital into goods and services
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non-renewable resources
resources such a coal or oil which once exploited cannot be replaced
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non- sustainable resources
resouce which is being economically exploited in such a way that it is being reduced over time
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primary sector
extractive and agricultural inductries
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productivity
output per unit of input employed
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renewable resources
can be exploited over and over again because they have the potential to renew themselves
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secondary sector
production of goods, mainly manufactured
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specialisation
when an individual, a firm, a region or a country concentrates on the production of a limited range of goods and services
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sustainable resource
renewable resource which is being economically exploited in such a way that it will not diminish or run out
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tetiary sector
production of services
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nominal values
values unadjusted for the effects of inflation
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real values
values adjusted for the effects of inflation
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equilibrium
the point where what is expected or planned is equal to what is realized or actually happens
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normative economics
the study and presentation of policy prescriptions involving value judgments about the way in which scarce resources are allocated
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Normative statement
a statement which cannot be supported or refuted because it is a value judgement
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positive economics
the scientific or objective study of the allocation of resources
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positive statement
a study which can be supported or refuted by evidence
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command economy
economic system where government allocates resources in society
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Free market economy
an economic system which resolves the basic economic problem through the market mechanism
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mixed economy
both market and government allocate resources
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consumer surplus
the difference between how much buyers are prepared to pay for a good and what they actually pay
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demand
the quantity purchased of a good at any given price,given that other determinants of demand remain unchanged
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producer surplus
the difference between the market price which firms receive and the price at which they are prepared to supply
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supply
the quantity of goods that suppliers are willing to sell at any given price over a period of time
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equilibrium price
the price at which there is no tendency to change because planned purchases(demand) are equal to planned sales(supply)
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excess demand
where demand is greater than supply
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excess supply
where supply is greater than demand
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complement
a good which is purchased with other goods to satisfy a want
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composite demand
when a good is demanded for two or more distinct uses
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derived demand
when the demand for one good is the result of or derived from the demand for another good
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joint demand
when two or more complements are bought together
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joint supply
when to or more goods are produced together so that a change in supply of one good will necessarily change the supply of the other goods with which it is in joint supply
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substitue
a good which can be replaced by another to satisfy a want
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elastic demand
where the price elasticity of demand is greater than 1. the responsiveness of demand is proportionally greater than the change in price.
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inelastic demand
where the price elasticity of demand is less 1. the responsiveness of demand is proportionally less than the change in price
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giffen good
a special type of inferior good where demand increases when price increases
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inferior goods
a good where demand falls when income increases
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normal good
a good where demand increases when income increases
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substitution effect
the impact on quantity demanded due to a change in price, assuming that consumers real incomes stay the same.
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ad valorem tax
tax levied as a percentage of the value of the good
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incidence of tax
the tax burden which falls on the taxpayer
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specific or unit tax
tax levied on volume
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subsidy
a grant given which lowers the price of a good usually designed to encourage production or consumption of a good
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government failure
occurs when a government intervention leads to a net welfare loss
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buffer stock scheme
a scheme whereby an organisation buys and sells in the open market so as to maintain a minimum price in the market for a product
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symmetric information
where buyers and sellers have access to the same information
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asymmetric information
where buyers and sellers have different amount of information
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free rider
a person or organisation which receives benefits that others have paid for without making any contribution themselves
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merit good
a good which is under provided by the market mechanism
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private good
a good where consumption by one person results in the good not being available for consumption by another
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public good
A good where consumption by one person does not reduce the amount available for another person
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allocative efficiency
occurs when resources are distributed in such a way that no consumer could be made better of without other consumers being made worse of
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dynamic efficiency
occurs when resources are allocated effictiently over time
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market failure
where resources are inefficiently allocated due to imperfections in the working of the market mechanism
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productive efficiency
is achieved when production is at its lowest cost
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static efficiency
occurs when resources are allocated efficiently at a point in time
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technical efficiency
is achieved when a given quantity of output is produced with the minimum number of inputs
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Other cards in this set
Card 2
Front
good which are scarce because their use has an opportunity cost
Back
economic goods
Card 3
Front
goods which are unlimited in supply and which therefore have no opportunity cost.
Back
Card 4
Front
the benifits forgone of the next best alternative
Back
Card 5
Front
shows the maximum potential level of output for two goods or services that an economy can achieve when all its resources are fully and efficiently employed
Back
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