Economics Unit 1

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Occurs when there are inefficient resources to provide for everyone's wants.
scarcity
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The benefits foregone of the next best alternative
opportunity cost
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Inputs used in the production of goods and services: land, labour, capital, enterprise
factors of production
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A resource whose stock level can be maintained over a period of time
renewable
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A resource whose stock level is decreased over time as it is consumed
non-renewable
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A diagrammatic representation of the maximum level of output that an economy can achieve when all resources are fully employed
production possibility frontier
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Occurs when an individual, a firm, a region or a country concentrates on the production of a limited range of goods and services in order to increase productivity
specialisation
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One form of specialisation, where individuals concentrate on the production of a particular good or service
division of labour
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A type of economy where decisions on production and prices are left to market forces
free market
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A type of economy where decisions on production and prices are decided by a combination of government and private sector forces
mixed
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A type of economy where the government makes all of the decisions on production and prices. Also known as a command economy
planned
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Concerned with facts and is value-free, can be tested as true or false using evidence
positive economics
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Concerned with value-judgements and is a non-scientific approach or expression
normative economics
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Where buyers and sellers come into contact for the purpose of exchange
market
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Refers to raw materials or minerals used in the production of goods and services
commodity
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Refers to the quantity of a good or service purchased at a given price over a given time period
demand
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The responsiveness of demand for a good to a change in price
price elasticity of demand
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The responsiveness of demand for a good to a change in income
income elasticity of demand
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Refers to a good where a rise in income causes a rise in quantity demanded
normal goods
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Refers to a good where a rise in income causes a fall in quantity demanded
inferior goods
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The responsiveness of demand for good B to a change in price of good A
cross price elasticity of demand
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Goods that are in direct competition
substitute
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Goods that are in joint demand
complementary
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Refers to the quantity of a good or service that firms are willing to sell at a given price over a given time period
supply
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The responsiveness of the supply of a good to a change in price
price elasticity of supply
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The difference between the amount a consumer is willing to pay and the amount they actually pay
consumer surplus
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The difference between the amount a supplier is willing to supply at and the amount they actually receive
producer surplus
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Resources are scarce, meaning that goods and services are in short supply. The name of the function of the price mechanism that allocates these goods and services to those willing to pay the most for them
rationing
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The name of the function of the price mechanism that means rising prices encourage firms to produce more of a given good or service
incentive
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The name of the function of the price mechanism that indicates changes in the conditions of supply or demand
signalling
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A tax levied directly on an individual or organisation e.g. income tax
direct tax
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A tax levied on the purchase of goods and services e.g. VAT
indirect tax
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A tax placed as a fixed amount per unit of a good
specific tax
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A tax placed as a percentage of the price of a good
ad valorem tax
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A grant, usually provided by the government, to encourage suppliers to increase production of a good or service leading to a fall in price
subsidy
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Refers to the legal minimum hourly rate of pay an employer can pay its workers
national minimum wage
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Occurs when the price mechanism causes an inefficient allocation of resources leading to a net welfare loss in society
market failure
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Those costs or benefits which are external to an exchange; they are third party effects ignored by the price mechanism
externalities
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Goods which are provided by the state due to their characteristics of non-excludability and non-rivalry
public goods
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The characteristic of public goods that means that once a good has been produced for the benefit of one person, it is impossible to stop others from benefiting
non-excludability
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The characteristic of public goods that means that as more people consume a good, it does not reduce its availiability to others. Also known as non-diminishability
non-rivalry
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Goods which are provided by firms due to their characteristics of rivalry and excludability
private goods
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The problem concerning public goods that means that because of non-excludability and non-rivalry rational consumers would not pay for a good
free rider problem
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Where producers and consumers have perfect and equal market information on a good or service
symmetric information
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Where producers and consumers have imperfect and unequal market knowledge, could lead to misallocation of resources
asymmetric information
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Beneficial goods that are under-consumed due to asymmetric information in the market, e.g. healthcare and education
merit goods
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Goods that are detrimental to the consumer yet are over-consumed due to asymmetric information in the market, e.g. tobacco, alcohol and gambling
demerit goods
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Refers to the inability of workers to change from one job to another, both occupationally and geographically
immobility of labour
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Short-term unemployment while people are between jobs
frictional unemployment
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A more serious type of unemployment due to a mismatch of skills and location between job seekers and job providers
structural unemployment
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Refers to the obstacles which prevent labour moving from one area to another to find work
geographical immobility of labour
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Refers to the obstacles which prevent labour moving from one professional area to another to find work
occupational immobility of labour
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A system of government intervention that sets minimum and maximum prices in a commodity market in order to stabilise producer incomes and ensure supply in the market
buffer stock scheme
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Occurs if government intervention leads to a net welfare loss due to a misallocation of resources
government failure
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Other cards in this set

Card 2

Front

The benefits foregone of the next best alternative

Back

opportunity cost

Card 3

Front

Inputs used in the production of goods and services: land, labour, capital, enterprise

Back

Preview of the front of card 3

Card 4

Front

A resource whose stock level can be maintained over a period of time

Back

Preview of the front of card 4

Card 5

Front

A resource whose stock level is decreased over time as it is consumed

Back

Preview of the front of card 5
View more cards

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