The next best alternative that is forgone when the next best alternative is chosen
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Economic goods
Goods that are scarce and therefore have an opportunity cost
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Free goods
Goods that have no opportunity cost e.g. air.
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Renewable resources
Resources that are able to be replenished over time, whereas non renewables such as oil or gas run out.
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Profit
When total income or revenue for a firm is greater than total costs.
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Productive efficiency
When a firm operates at min. avg total cost producing the max output from the inputs put in.
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Allocative efficiency
When an economy cannot make anyone better off without making someone else worse off.
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Productivity
Measure of efficiency measuring ratio of outputs to inputs. Most commonly labour productivity output per worker.
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Division of labour
Breaking the production processes down into a seq. of tasks with workers assigned to particular tasks
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Specialisation
The production of a limited range of goods by a individual firm or country in cooperation with others so that together a full range of goods is produced
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Value judgements
Statements or opinions that are not testable or cannot be verified.
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Normative statements
opinions that require value judgements to be made
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Positive statements
Statements that can be tested against data
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Demand
the amount that consumers are willing and able to buy at a given price
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Normal goods
goods or services which will see an increase in demand when incomes rise
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Inferior goods
Goods or services that will see demand fall when income rises
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Complementary goods
Goods that are consumed together: bread and butter
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Composite demand
a good that is demanded for more than one purpose so that an increase in demand for one reduces the availability of supply for the other: milk in cheese and butter.
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Derived demand
when the demand for one good comes from demand for another, cars stimulates demand for steel.
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Supply
the amount offered for sale by firms at a given prive
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Joint supply
When the producition of one good also results in the production of another
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Equilibrium
the price at which demand is equal to supply and there is no tendancy to change
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Price elasticity
the responsiveness of deamdn to a change in the price level. Q before you P
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Subsidies
Payments by government to producers to encourage production of a good or service
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Income elasticity of demand YED
the proportion demand changes when theres a change in income
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Inferior goods
Goods or services that will see demand fall when income rises
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Market failure
where the market fails to produce what consumers require at the lowerst possible price
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Government failure
when governement interventiion does not improve the allocation of resources and leads to a welfare loss.
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Negative externatilities
costs imposed on a third party not involved with consuming or producing the good
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Fixed costs
costs of production that do not vary as output changes
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Variable costs
costs of production that vary with output
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Economies of scale
where an increase in the scale of production leads to a reduction in average costs
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Diseconomies of scale
where an increase in the scale of production leads to increase in average costs for a firm
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Monopoly
A market structure dominated by a singer suppliers/ more than 25% market share
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Marginal private cost
the cost to an individual or firm of an economic transaction
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Marginal external cost
the cost to the 3rd part of an economic transaction
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Marginal social cost
the full cost to society of an economic transaction including private and external costs
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Marginal private benefit
the benefit to an individual or firm of an economic transaction
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Marginal external benefit
the benefit to 3rd parties of an economic transaction
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Marginal social benefit
the full benefity to society of an economic transaction including private and external benefits
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Merit good
a good which would be underconsumed in a free market.
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Demerit good
a good that would be over consumed in a free market because its benefit is less than consumers realise
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Public good
a good that posesses the non excludable and non rivalable characteristics
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Free rider problem
where some consumers benefit from other consumers purchasing a good.
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Indirect tax + examples
tax on income e.g. capital gains/ income tax
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Direct tax + examples
tax on spending e.g. vat/ excise duty
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Other cards in this set
Card 2
Front
Goods that are scarce and therefore have an opportunity cost
Back
Economic goods
Card 3
Front
Goods that have no opportunity cost e.g. air.
Back
Card 4
Front
Resources that are able to be replenished over time, whereas non renewables such as oil or gas run out.
Back
Card 5
Front
When total income or revenue for a firm is greater than total costs.
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