Economics revision

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Absolute poverty
Is not having enough income to provide basic necessities and survive.
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Aggregate demand
is the total of all demand in the economy from consumption, investment, government expenditure and the net amount of trade. AD = C+I+G+(X-M)
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Allocation of resources
how resources are shared out/distributed in an economic system.
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allocative efficiency
is achieved when resources are used to yield the maximum benefit to everyone. it is impossible to redistribute them without making someone worse off.
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Animal spirits
was a phrase used by John Maynard Keynes to describe the way business people relied on hunches or instict to make decisions rather than a rational analyses of the facts.
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Cartel
A cartel is any agreement between businesses to reduce competition or not to compete with each other. The agreement is usually secret and may be implemented in various ways.
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The Competition Commission
Is an independent public body which conducts in- depth inquires into mergers, markets and the regulation of the major regulated industries. it has the powers to impose changes on the companies and ban proposed mergers.
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Consumer Sovereignty
happens when the consumer has control. the buying decisions of the consumer dictate what is produced in the market. while businesses can produce and try to sell whatever they want, it is the consumer's decision as to whether to buy or not.
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Consumption
is the total of all spending by individuals on private consumption.
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Cost- benefit analysis
attempts to calculate the potential costs and benefits of a project to make a decision on way or the other. in theory, if the benefits outweigh the costs then the project goes ahead, if the costs are greater it does not.
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Demerit goods
are over-produced by the free market, in quantities that are greater than the optimal level for society. they are generally though to be bad for society as a whole.
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Direct tax
a direct tax is taken at the source and goes directly to the government, e.g Income tax and National Insurance contributions
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economic shocks
are unexpected events that effect that effect the economy and often come from outside of it. they are unexpected and unpredictable.
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equity
in economics is concerned with fairness, the idea that all citizens have the same opportunities and chances in life. it does not mean that there are equal outcomes in terms of income and wealth distribution.
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equality
mean equality of outcome in terms of income and wealth
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explicit collusion
occurs when there is a meeting or actual agreement between businesses to avoid competing vigorously and to follow a joint strategy.
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external benefits
are benefits or positive side effects for a third party who is neither the producer nor the consumer
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external costs
are costs or negative side effects imposed on the third party who is neither the producer or consumer.
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fiscal policy
involves changes in the levels of taxation and/or government expenditure in order to affect the economy.
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free rider problem
occurs when public goods are under-provided or not provided at all because individuals are able to consume the good despite paying little or nothing towards the cost.
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gini coefficient
provides an objective measure of income inequality and can range from 0 to 1. a coefficient of 0 would mean income is share equally between all individuals, whilst a coefficient of 1 would mean one person within the population has all the income.
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government expenditure
is the total of all spending by the government over the year
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government failure
occurs when government intervention makes the situation worse rather then better. in competition policy this can mean that one source of market imperfection is dealt with but replayed by another.
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incentive
an incentive is any factor that enables or motives a particluar course of action, or counts as a reason for preferring one choice to the alternatives.
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indirect taxes
are added onto prices and go indirectly to the government from the seller. examples include VAT and Excise duty.
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marginal social benefit
is the change in total social benefit to society as a whole for producing one further unit, or taking one further action, in an economy.
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marginal social cost
is the change in the total social cost to society as a whole for producing one further unit, or taking one further action, in an economy
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profit signalling mechanism
the means by which resources are allocated. the presence of profit in a market attracts more resources and loss sends them away
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market failure
happens when a market does not efficiently allocate resources to achieve the greatest possible consumer satisfaction. the allocation of resources is such that a reallocation would make some people better of. allocative efficiency hasn't been achieved
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merit goods
can be provided by the private sector and often are, but the quantity that the free market provides is lower than the optimum level for society. they are under provided by the market mechanism.
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monetary policy
uses interest rates to vary the costs of borrowing and influence the level of aggregate demand.
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natural monopoly
occurs when the most efficient scale of production is a monopoly. more than one producer or supplier would involve wasteful duplication of resources.
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overheating
is an expression used to describe the onset and spread of inflation throughout an economy.
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the poverty trap
is a situation in which someone would be even poorer or not much richer if they had a job because they would no longer receive financial help from the government.
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progressive tax
is one that takes a greater percentage of income from the richer people than the poorer people
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public good
street lights- the free market wouldn't supply it.
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regressive tax
is one that takes a greater percentage of income from poorer people than richer people
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regulatory body
is a public authority or government agency responsible for exercising
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regulatory capture
happens when the regulator is more influenced by the industries point of view than the consumers
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relative poverty
exists when someone does not have enough income to participate in the society in which they live.
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restrictive practises
include any action that a business uses to limit competition
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social benefits
total benefits of producing goods and services and are calculated by adding together the private and external benefits
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social costs
adding together private and external costs
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supply-side policies
include all measures designed to increase the productive capacity of the economy. they influence aggregate supply rather then aggregate demand.
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tacit collusion
occurs when competing firms appear to follow a similar strategy to reach the same aim, such as avoiding price cutting, but without meeting or having an actual agreement as such.
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trade balance (X-M)
is the difference between exports, which are part of the overall demand for the UK produced products, and imports which are not produced in the UK.
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Trade-offs
occur when two objectives cannot both be achieved. the more you have of one variable the less you have of the other.
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Other cards in this set

Card 2

Front

is the total of all demand in the economy from consumption, investment, government expenditure and the net amount of trade. AD = C+I+G+(X-M)

Back

Aggregate demand

Card 3

Front

how resources are shared out/distributed in an economic system.

Back

Preview of the back of card 3

Card 4

Front

is achieved when resources are used to yield the maximum benefit to everyone. it is impossible to redistribute them without making someone worse off.

Back

Preview of the back of card 4

Card 5

Front

was a phrase used by John Maynard Keynes to describe the way business people relied on hunches or instict to make decisions rather than a rational analyses of the facts.

Back

Preview of the back of card 5
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