Markets Key Terms

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Allocative Efficiency
When avalible ecnomic resouces are used to produce goods or serives the best matches peoples taste
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Average Costs
Total Costs/Output(Quantity Produced)
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Average Fixed Costs
Fixed Costs/Output(Quantity Produced)
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Barrers to Entry
Obsticles prventing a new business from entering or leaving a market
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Agreement between competiting firms to achieve something
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Large businesses work togther for a mutral benefit
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Compeitive Market
When there are many sellers and buyers with full infomation, firms can easily entry and exit this market
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Consumer surplus
The difference between what the consumer was willing and able to pay and what they actually pay
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Contestable Market
When there are 0 barriers or 0 barriers to exit a market
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De-merit Goods
Goods which do not benefit societ or an individua
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Disecnomies of Scale
As producion increases the average unit cost increases
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Economies of Scale
As production increases the average unit costs decreases
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When it's possible to prevent a person from using a good or service which they havent paid for
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Fixed Costs
Cost of production which, in the short run, doesnt change with output
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Government failure
When the government intervene in an attmept to fix a problem but cause a misallocation of resouces
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Things to motivated people to perform an action
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Infomation failure
Type of Market Failure: Where peopl ehave a lack of infomation about ecnomic decisions
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Invisiable Hand
Adam Smith Theory: Metaphor to describe uninteneded social benefits resulting in an individuals actions
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Market Failure
When there is a missallocation of resouces in the ecnomoy, either completly failing to provide a good or service or the wrong amount
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Market Shortage
When there is excess demand or when the quantiy demanded is greater than supplied
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Merit Good
Goods which benefit society or individuals
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When a firm has no or little compeition allowing them to set the market price or chose how much to sell
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Negative externalities
Negative costs suffered to a third party, the producer and consumer being the first and second party
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Non Price Compeition
Compeition resulting from things other than lowering prices
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Polluter Pays Principle (PPP)
When the people who casue pollusion pay for it
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Postive Externalities
Benefits to a thrid party
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Price Signals
Infoamtion conveyed to consumers and producers which signal them to either increase or decrease demand or supple
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Private Benefit
Economic gain to those directly involved in a ecnomic transaction
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Private Costs
Ecnomic costs to those direcly involived in an ecnomic transaction
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Private Goods
Goods which need to be bought and once consumed cannot be consumed by another
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Producer Surplus
Difference between how much the producer recieves and the minimum they are willing to recieve for selling their goods
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Productive efficiency
When its impossible to produce more of one good without producing less of another
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Public Goods
Goods which once consumed can be used by another without reducing avavliblity
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Conveying infomation from one party to another
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Social Benefit
Benefits to society from producing or consuming a good or service
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Social Costs
Cost of an activity to society
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An incentive or benefit given by the government to an inidividual or group to remove a type of burden and usally in the interest of the public
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Total Revenue
Total amout of money made from selling goods or services
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Tradegy Of the Commons
Ecnomics Theory: Where an individual acts indpednantly and rationally according to their own interest and not the interest of common good by all using that rescouce
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Card 2


Total Costs/Output(Quantity Produced)


Average Costs

Card 3


Fixed Costs/Output(Quantity Produced)


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Card 4


Obsticles prventing a new business from entering or leaving a market


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Card 5


Agreement between competiting firms to achieve something


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