An indirect tax based on a percentage of the sales price of a good or service. The best known example in the UK is Value Added Tax
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Asymmetric Information
Asymmetric information occurs when somebody knows more than somebody else in the market. Such asymmetric information can make it difficult for the two people to do business together
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Buffer Stock Schemes
Buffer stock schemes seek to stabilize the market price of agricultural products by buying up supplies of the product when harvests are plentiful and selling stocks of the product onto the market when supplies are low.
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Complementary Goods
Two goods that are said to be in joint demand. E.g, fish and chips, DVDs and DVD players.
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Consumer Surplus
Consumer surplus is a measure of the welfare that people gain from the consumption of goods and services, or a measure of the benefits they derive from the exchange of goods.
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Cross Price Elasticity of Demand
Cross price elasticity (CPed) measures the responsiveness of demand for good X following a change in the price of good Y (a related good).
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Division of Labour
Division of labour means the specialization of the functions and roles involved in making the separate parts of a product.
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Free Market Economy
In a free market economic system, governments take the view that markets work, assume a laissez faire (let alone) approach, step back, and allow the forces of supply and demand to set prices and allocate resources.
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Free Rider Problem
This means some consumers may avoid payment and become free riders i.e. benefit without contributing to the cost of provision.
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Government Failure
Government failure occurs when there is an attempt to treat market failure by government intervention and the eventual outcome may be a deepening of the market failure or even worse a new failure may arise.
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Imperfect Information
Where a consumer or producer does not have complete market information in order to make efficient choices.
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Inferior Good
With a higher income a consumer can switch from the cheaper substitute to the more expensive, but preferred alternative. As a result, less of the inferior product is demanded at higher levels of income. Negative income elasticity of demand.
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Market Equilibrium
Equilibrium means a state of equality between demand and supply. Without a shift in demand and/or supply there will be no change in market price.
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Market Failure
Market failure occurs when freely functioning markets, operating without government intervention, fail to deliver an efficient or optimal allocation of resources
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Marketable Pollution Permits
A marketable pollution permit gives a firm the right to emit a given quantity of waste / pollution in a given time period.
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Merit Goods
Merit Goods are those goods and services that the government feels that people will under-consume, and which ought to be subsidised or provided free at the point of use.
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Mixed Economy
Most modern economies are mixed economies, comprising not only a market sector, but also a non-market sector, where the government uses the planning mechanism to provide goods and services such as police, roads and health.
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Opportunity Cost
Opportunity cost measures the cost of any choice in terms of the next best alternative foregone.
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Price Mechanism
The price mechanism is the means by which decisions of consumers and businesses interact to determine the allocation of resources between different goods and services.
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Producer Surplus
Producer surplus is a measure of producer welfare. It is measured as the difference between what producers are willing and able to supply a good for and the price they actually receive.
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Production Possibility Frontier
A production possibility frontier (PPF) or boundary shows the combinations of two or more goods and services that can be produced using all available factor resources efficiently.
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Other cards in this set
Card 2
Front
Asymmetric information occurs when somebody knows more than somebody else in the market. Such asymmetric information can make it difficult for the two people to do business together
Back
Asymmetric Information
Card 3
Front
Buffer stock schemes seek to stabilize the market price of agricultural products by buying up supplies of the product when harvests are plentiful and selling stocks of the product onto the market when supplies are low.
Back
Card 4
Front
Two goods that are said to be in joint demand. E.g, fish and chips, DVDs and DVD players.
Back
Card 5
Front
Consumer surplus is a measure of the welfare that people gain from the consumption of goods and services, or a measure of the benefits they derive from the exchange of goods.
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