Economics Key Words

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Scarcity
Resources available can't satisfy all wants
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Choice
Individual with limited income and unlimited wants ha to make a choice
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Exchange
Having made a choice acquire goods via exchange (good or money)
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Opportunity Cost
cost of satisfying one want is the alternative good/service one chooses to give up
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Microeconomics
Study of economics at an individual, group or company level
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Macroeconomics
Study of a national economy as a whole
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GDP
Total UK output
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Economic Problem
Resources are limited but wants are infinite
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Market economy
Resources of a company privately owned. Production is under taken by private firms working for profit
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Planned Economy
Resources under control and direction of government. Errors could lead to shortage or surples
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Mixed economy
Private sector operates under market forces. Influenced by tax (health and education)
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Demand
willinges and ability to buy a certain number of goods at a given price over a given period of time
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Supply curve
Shows relationships between market prices and quantities which suppliers are prepared to offer for sale
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Equilibrium
Point of intersection where demand equal supply
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Dumping
Surplus goods have been sold cheaply in foreign markets in order to keep high races in home market. Bad for producers in foreign market
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Subsidy
Payment by government to firs to encourage increases in supply of a good
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Tax
Payment to government, it increases firms costs
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Elastic
Increase in price leads to a fall in total revenue
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Inelastic
Increase in price equals increase in total revenue
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Income elasticity
% change in quantity demanded➗% change in income, +➗+= + normal good, -➗+=- Inferior good
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Normal Good
See increase in demand when income rises
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Inferior Good
Demand fall when income rises
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Cross elasticity of demand
% change in demand for good A➗% change in demand for good B, += Substitutes, -= Complimentary
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Elasticity of demand
% change in quantity demand ➗% change in price, More than 1 = elastic, Equal to 1 = unit elastic, Less than 1 = Inelastic
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% change
Change ➗ original x 100
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Revenue
Quantity sold x price
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Chancellor of Exchequer
In order to raise revenue taxes are put on goods which have a inelastic demand
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close substitues
Change in price of one good has a large effect on the quantity brought of the other.
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Complementary goods
Increase in the price of good b will lead to a fall in demand for good A
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price of essential goods
Takes a large proportion go the consumers income and will have a large effect on the quantity demanded of another good.
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Fuel Poverty
Fun bills take up more than 10% of your income
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Price mechanism
Ration of scarce goods, signal to firms, incentive to firms, allocates resources
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Fixed costs
Costs of production that don't vary as output changes
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Variable Costs
Costs of production that vary with output
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Total Cost
fixed cost + variable cost
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Average Cost
Total cost ➗ Quantity
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Labour productivity
total output per time period ➗ number of units of labour
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Productive efficiency
Achieved when a fir is producing at lowest average total cost, benefiting from all available economies of scale
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Short run
When there are fixed factors of production
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Long run
All factors of production are variable
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Profit
total revenue - total cost
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Market structure
No two markets are the same. The market structure is the characteristics of the market which influence the way the firms in the market behave
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Perfect competition
Perfect knowledge, Homogenous goods, Free entry and exit, Large number of firms
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Concentration Ration
Provide a good indicator of the degree of monopoly power in a market structure. A ratio which indicates the total market share of a number of leading firms in a market or the output of these firms as a percentage of total market output
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Consumer sovereignty
Through exercising their spending power consumers collectively determine what is produced in a market. strongest in a perfectly competitive market.
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Producer sovereignty
Producers of firms in a market determine what is produced and what prices are charged
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Pure monopoly
occurs when a single firm produces the whole of the output of a market. faces no competition since there are no firms to compete against
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Looser monopoly
Market in which there is a dominant firm but some other firms. Relative rather than absolute
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Natural monopoly
Country or firm had complete control of natural resources. Only room in a market for one firm benefiting from economies of scale to the full.
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Artificial barriers
result of deliberate action by firms already in the market to prevent new firms from entering the market. Patents are used by firms as a strategic barred to entry.
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Barriers to entry
Legal barriers, predatory pricing, advertising, economies of scale, geographical location and patents
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Externalities
Third party effects arising from production or consumption go goods and services for which no compensation is paid
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Private cost
Cost of an activity to the firm
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Social Cost
Cost of an activity not just to the firm but to society as a whole.If the social cost is greater than the private cost = negative externality in production. Social cost less than private cost = positive externality
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Private benefit
Benefit to consumer of a good
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Social benefit
Benefit to society as a whole
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Merit good
Health and education are under provided by the market
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Social Cost
private cost + negative externality
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Social benefits
Private benefit + positive externality
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Market failure
Resources are inefficiently allocated resources due to imperfections in the market mechanisms
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Externalities
Negative= social cost greater than private cost, demerit, over produced. Positive= Social benefit greater than private benefit, education and health care, under produced.
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Missing markets
Public good= non rivalry and non excludability, free rider.
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Imperfect competition
Monopoly= Higher prices than in perfect competition, decreased quantity sold
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Perfect competition
Many firms, perfect knowledge, no barriers to entry, homogenous goods
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Other cards in this set

Card 2

Front

Individual with limited income and unlimited wants ha to make a choice

Back

Choice

Card 3

Front

Having made a choice acquire goods via exchange (good or money)

Back

Preview of the back of card 3

Card 4

Front

cost of satisfying one want is the alternative good/service one chooses to give up

Back

Preview of the back of card 4

Card 5

Front

Study of economics at an individual, group or company level

Back

Preview of the back of card 5
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