Economics

Economic problem
how to allocate scarce resources among alternative uses
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Four factors of production?
Land, Labour, Capital, Entrepreneurship
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Opportunity cost
the cost of the next best alternative which is foregone when a choice is made
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Specialisation
the concentration by a worker or workers, firm, region or whole economy on a narrow range of goods and services
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Production possibility curve
shows the maximum quantities of different combinations of output of two products, given current resources and the state of technology
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Supply
the quantity of a product that producers are willing and able to provide at different market prices over a period of time
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Demand
the quantity of a product that consumers are able and willing to purchase at various prices over a period of time
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The three different types of economy systems
Market, Command and mixed
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market economy
an economic system whereby resources are allocated through the market forces of demand and supply
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Command economy
an economic system in which most resources are state owned and also allocated centrally
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Mixed economy
an economic system in which resources are allocated through a mixture of the market and direct public sector involvement
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Consumer surplus
the extra amount that a consumer is willing to pay for a product above the price that is actually paid
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Producer surplus
the difference between the price a producer is willing to accept and what it is actually paid
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PED definition
the responsiveness of the quantity demanded to a change in the price of the product
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PED equation
% change in quantity demanded / % change in price
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YED definition
the responsiveness of the quantity demanded to a change in income
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YED equation
% change in quantity demanded / % change in income
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normal goods
goods with a positive income elasticity of demand
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Inferior goods
goods for which an increase in income leads to a fall in demand
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XED definition
the responsiveness of demand for one product in relation to a change in price of another product
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XED equation
% change QD of product A / % change of price of product B
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PES definition
the responsiveness of the quantity supplied to a change in the price of the product
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Market failure
where the free market mechanism fails to achieve economic efficiency
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infomation failure
a lack of information resulting in consumers and producers making decisions that do not maximise welfare
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asymmetric information
information not shared equally between two parties e.g. you do not have the same knowledge as your doctor
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externality
an effect whereby those not directly involved in taking a decision are affected by the actions of others
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negative externality
this exists where the social cost of an activity is higher than the private cost
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positive externality
this exists where the social benefit of an activity exceeds the private benefit
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merit goods
these have more private benefits than their consumers actually realise
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de-merit goods
their consumption is more harmful than is actually realised
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public goods
goods that are collectively consumed and have the characteristics of non-excludability and non-rivalry
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non-excludability
situation existing where individual consumers cannot be excluded from consumption
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non-rivalry
situation existing where consumption by one person does not affect the consumption of all others
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Other cards in this set

Card 2

Front

Land, Labour, Capital, Entrepreneurship

Back

Four factors of production?

Card 3

Front

the cost of the next best alternative which is foregone when a choice is made

Back

Preview of the back of card 3

Card 4

Front

the concentration by a worker or workers, firm, region or whole economy on a narrow range of goods and services

Back

Preview of the back of card 4

Card 5

Front

shows the maximum quantities of different combinations of output of two products, given current resources and the state of technology

Back

Preview of the back of card 5
View more cards

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