Key Definitions - OCR - Markets in Action

Key Definitons from the Markets in Action unit of AS OCR Economics

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  • Created by: Eleanor
  • Created on: 17-03-13 11:50
Economic Problem
Where consumers have infinite wants when only scarce resources are available.
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Market
Where buyers and sellers come together to exchange goods and services for an agreed price.
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Opportunity Cost
The benefits sacrificed from giving up the next best alternative.
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Production Possibility Curve
Shows the maximum combinations of goods and services that can be produced from a given set of resources.
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Scarcity
Where there is a insufficient amount of something due to consumer, producer or government demand for it.
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Demand
The amount of a good or service the consumer is both willing and able to buy for a given price at a given time.
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Consumer Surplus
Consumer surplus is the difference between what the consumer is willing to pay for a good and the current market price.
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Supply
The quantity of a good or service a producer is willing to offer at a given price at a given time.
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Producer Surplus
The difference between what the producer receives for selling the good and the price they are willing to produce the good for.
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Equilibrium
The point where both supply and demand are equal.
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Price Elasticity of Demand
Measures the responsiveness of quantity demanded following a percentage change in price.
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Income Elasticity of Demand
Measures the responsiveness of quantity demanded following a percentage chance in income.
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Cross elasticity of Demand
Measures the responsiveness of quantity demanded of one good following a percentage change in price of another good.
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Price Elasticity of Supply
Measures the responsiveness of quantity supplied following a percentage change in price.
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Allocative Efficiency
Allocative efficiency is achieved when scarce resources are used to produce the goods and services the consumer wants in the correct quantities
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Market Failure
When scarce resources do not lead to allocative efficiency.
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Negative Externality
Negative externalities are the unwanted third party spillover effects to society from the economic actions of the first party. (Marginal social costs are greater than marginal private costs)
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Regulation
An attempt to control the consumption of demerit goods, which have elements of negative externalities.
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Indirect Tax
Taxes imposed by the government on goods and services.
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Positive Externality
Positive externalities are the positive third party spillover effects to society from the economic activity of the first party. (Marginal social benefits are greater than marginal private benefits)
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Subsidy
An amount of money given directly to firms by the government as an incentive to increase production. When given to the consumer its aim is to increase consumption.
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Information Failure
When a product, service or activity is consumers without full knowledge of the potential consequences.
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Merit Good
A good which is better for the consumer than they fully realise. It has elements of a good with a positive externality.
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Demerit Good
A good which is worse for the consumer than they fully realise. It has some of the features of a good with a negative externality.
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Public Good
A good which is non-diminishable and non-excludable, and not supplied in a free market.
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Other cards in this set

Card 2

Front

Where buyers and sellers come together to exchange goods and services for an agreed price.

Back

Market

Card 3

Front

The benefits sacrificed from giving up the next best alternative.

Back

Preview of the back of card 3

Card 4

Front

Shows the maximum combinations of goods and services that can be produced from a given set of resources.

Back

Preview of the back of card 4

Card 5

Front

Where there is a insufficient amount of something due to consumer, producer or government demand for it.

Back

Preview of the back of card 5
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