Econ 1 Terms

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Opportunity Cost
The next best alternative forgone when an economic decision is made
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Economic Goods
Goods that are scarce and therefore have an opportunity cost
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Free Goods
Goods that have no opportunity cost (e.g air)
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Free Market Economy
One in which there is very limited government involvement in providing goods and services. Its main role is to ensure fair rules
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PPB
Max. possible output with fixed resources and time period
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Allocative Efficiency
When not possible to make someone better off without making someone worse off
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Productive Efficiency
When a firm operates at min. ATC's
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Productivity
Measures ratio of inputs to outputs
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Specialisation
Production of a limited range of goods by a firm
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Division of Labour
Breaking the production process down into sequence of tasks
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Value Judgements
Statements or opinions expressed that are not testable
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Positive Statement
Statements that can be tested
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Normative Statement
Opinions that require a Value Judgement to be made
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Demand
Amount Consumers are willing and able to buy at a given price level
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Effective Demand
Demand supported by the ability to pay for a good or service
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Market Demand
Total demand in a market for a good
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Contractions in Demand
Falls in Qd and Rise in P
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Extensions in Demand
Falls in P and Rise in Qd
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Normal Goods
Goods or services that will see an increase in demand when income rises
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Inferior Goods
Will see a fall when income rises
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Complementary Products
Goods consumed together
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Composite Demand
Good demanded for more than one purpose
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Derived Demand
Demand for one good comes from another (cars stimulate steel)
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Supply
Amount offered for sale at each given price level
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Planned Supply / Actual
Amount producers plan to produce / amount produced
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Market Supply
Sum of all individual firm's supply curves at each given price
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Contraction in Supply
When amount offered for sale is reduced as P down
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Extension in Supply
When amount offered for sale is up as P up
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Joint Supply
When production of one good results in another
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Price Elasticity
Responsiveness of demand to a change in price level
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Income Elasticity of Demand
The proportion to which D changes when Income does
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Commodity
Traded good (tea etc.)
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Market Failure
Where market fails to produce what consumers require at lowest possible cost
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Government Failure
When government intervention to correct market failure doesn't improve allocation of resources
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Buffer Stock
Intervention system that aims to limit the fluctuations of price of commodity
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Externalities
Costs or benefits that spill over onto the 3rd party (consumption or production)
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Merit Good
Under consumed in free market. Benefits misunderstood
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Public Good
Non-excludable and non-rivalry
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Quasi-Public Good
Has some rivalry and excludability (national park entrance fee)
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Private Good
Excludable and rivalry
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Income/Wealth
Flow of earnings/stock of owned assets
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Other cards in this set

Card 2

Front

Goods that are scarce and therefore have an opportunity cost

Back

Economic Goods

Card 3

Front

Goods that have no opportunity cost (e.g air)

Back

Preview of the back of card 3

Card 4

Front

One in which there is very limited government involvement in providing goods and services. Its main role is to ensure fair rules

Back

Preview of the back of card 4

Card 5

Front

Max. possible output with fixed resources and time period

Back

Preview of the back of card 5
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