Economics F581

What is meant by the economic problem?
How to allocate scarce resources among alternative uses due to limited resources - scarcity and unlimited wants
1 of 50
What is meant by opportunity cost?
The next best alternative foregone when a choice is made
2 of 50
What is meant by a market?
Where buyers and sellers meet for the purpose of trading
3 of 50
Define PES
The responsiveness of quantity supplied to a change in the price of a good or service.
4 of 50
PES formula
% change in quantity supplied/% change in price
5 of 50
What is meant by scarcity?
limited or finite resources that are insufficient to meet unlimited wants
6 of 50
What is shown by a PPC curve?
the maximum quantity or output of two goods at maximum efficiency
7 of 50
What is meant by producer surplus?
the difference between the price a producer is willing to accept and what is actually paid
8 of 50
Define XED
the responsiveness of demand for one product to a change in price of another product
9 of 50
XED formula
% change in quantity demanded of good a / % change in price of good b
10 of 50
Define externality
An action taken by one economic agent that has a spillover effect on other third parties not directly involved
11 of 50
Define consumer surplus
the extra amount a consumer is willing to pay for a product above the price that is actually paid
12 of 50
Define YED
the responsiveness of demand to a change in income
13 of 50
YED formula
% change in quantity demanded / % change in income
14 of 50
Define demerit good
a good whose consumption is more harmful than consumers actually realise
15 of 50
How is market price determined?
Where demand and supply are equal
16 of 50
Allocative efficiency
where quantity supplied is equal to the quantity demanded and consumer satisfaction is maximised
17 of 50
Positive externality
Where social benefit are greater than private benefits and there is a benefit to a third party
18 of 50
Define PED
the responsiveness of quantity demanded or quantity following a change in the price of a product
19 of 50
PED formula
% change in quantity demanded / % change in price
20 of 50
Private costs
paid only by the producer or consumer directly concerned with the production or consumption of the good
21 of 50
Social costs =
private cost + external cost
22 of 50
Private benefit
benefit received only by the producer or consumer directly concerned with the production or consumption of a good.
23 of 50
Social benefit =
private benefit + external benefit
24 of 50
Merit good
a product or service that society judges everyone should have; consumption of merit goods is widely believed to generate positive externalities
25 of 50
Public goods
non-excludability & non-rivalry
26 of 50
Private goods
excludability & rivalry
27 of 50
Negative externalities
third party spill over effects arising from the production and/or consumption of goods and services for which no appropriate compensation is paid
28 of 50
Socially optimum level of consumption
where social benefit is equal to social cost
29 of 50
Market failure
when the government has to intervene because the market fails to achieve the socially optimum level of consumption
30 of 50
information failure
when information is incomplete, inaccurate or misleading and therefore consumers and producers make decisions that do not maximise social welfare
31 of 50
asymmetric information
exists when one party in a transaction has more information than the other party and has not shared this information
32 of 50
market-based intervention
involves some manipulation of the market mechanism
33 of 50
non-market intervention
does not involve manipulation of the market mechanism, focuses on government action
34 of 50
market based
indirect taxation; producer subsidies; pollution permits; information provision
35 of 50
non market
regulations & state provision
36 of 50
direct tax
taxes on the income of firms and people that cannot be avoided and are paid directly to the government, e.g income tax
37 of 50
indirect tax
taxes levied on goods and services, passed through an intermediary (usually a firm) and then passed on to the government
38 of 50
subsidy
a payment made by the government to a firm or an individual for the purpose of increasing the production or consumption of a good or service
39 of 50
polluter pays principle
any measure whereby the polluter explicitly pays
40 of 50
tradable permit
allows an owner to emit a certain amount of pollution and if unused/partially used can be sold to another polluter
41 of 50
Regulations
laws or standards passed by the government which must be met by companies/individuals, they aim to restrict or prohibit the sale or consumption of particular goods
42 of 50
dynamic market
a market that does not remain static because it is constantly changing and adapting
43 of 50
what is meant by a competitive market?
a market that consists of several different firms and many consumers, this means that prices can fluctuate as firms are fighting for the same consumers and the consumers are fighting to buy
44 of 50
functions of prices
signalling; incentive; rationing
45 of 50
supply
the number of goods and services firms are willing and able to supply at a given price level over a period of time
46 of 50
demand
the number of goods and services consumers are willing and able to buy at a given price level over a period of time
47 of 50
notional demand
products you are willing but unable to buy
48 of 50
economic systems
market; command and mixed economy
49 of 50
specialisation
a situation where individuals concentrate upon particular goods and services but not others
50 of 50

Other cards in this set

Card 2

Front

What is meant by opportunity cost?

Back

The next best alternative foregone when a choice is made

Card 3

Front

What is meant by a market?

Back

Preview of the front of card 3

Card 4

Front

Define PES

Back

Preview of the front of card 4

Card 5

Front

PES formula

Back

Preview of the front of card 5
View more cards

Comments

No comments have yet been made

Similar Economics resources:

See all Economics resources »See all Resource allocation resources »