Microeconomics

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Positive Statement
A statement of fact that can be scientifically tested to see if it is correct.
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Normative Statement
A statement including a value judgement of opinion.
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Opportunity Cost
The cost of giving up the next best alternative when making an economic decision.
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Production Possibility Frontier
Curve depicting various combinations of two products that can be produced when all resources are being used efficiently.
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Economic Growth
Increase in the potential level of real output the economy can produce over time.
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Productive Efficiency
Occurs when it is imposssible to produce more of one good without producing less of another good
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Allocative Efficiency
Occurs when the available economic resources are used to produce the combination of goods and services that best meets people's needs.
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Factors of Demand
Substitute Goods, Complementary Goods, Income, Tastes & Preferences, Population
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Normal Good
A good for which demand increases as income rises.
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Inferior Good
A good for which the demand decreases as income rises.
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Factors of PED
Substitutability, Percentage of Income, Necessities or luxuries, Time
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Factors of Supply
Costs of Production, Technology, Tax, Subsidies.
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Factors of PES
Level of Spare Capacity, Number of firms in market, Length of production period, Ease of accumulating stocks, Time, Ease of switching between alternative methods of production.
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Joint Supply
When one good is produced, another good is also produced from same materials. E.g Beef & Leather
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Competing Supply
When raw materials are used to produce one good they cannot be used to produce another good.
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Composite Demand
Demand for a good which has more than one use.
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Derived Demand
Demand for a good which is an input into the production of another good.
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Internal E.O.S
Cost saving resulting from the growth of the firm itself.
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External E.O.S
Cost saving resulting from the growth of the industry or market.
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Reasons for E.O.S
Risk-bearing, Financial, Managerial, Technological, Marketing, Purchasing.
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Reasons for D.E.O.S
Loss of control, lack of communication, loss of motivation.
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Concentration Ratio
The percentage of market share taken up by the largest firms.
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Factors influencing Monopoly Power
Barriers to entry, number of competitors, Advertising and monopoly power, Product differentiation.
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Product Differentiation
Making a product different from other products.
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Benefits of Monopoly
Economies of scale and invention/innovation.
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Predatory Pricing
Temporarily reducing price of a good below average to drive smaller firms out of market.
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Limit Pricing
Reducing price to just above average cost to deter firms from entering market.
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Private Good
A good, eg orange, that is excludable and rival.
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Public Good
A good, eg radio programme, that is non-excludable and non-rival.
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Merit Good
A good, such as healthcare, for which the social benefits of consumption exceed the private benefits.
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Demerit Good
A good, such as tobacco, for which the social costs of consumption exceed the private costs of consumption.
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Geographical Immobility
When workers find it difficult or impossible to move to jobs in other parts of the country.
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Occupational Immobility
When workers find it difficult or impossible to move between jobs due to lack of skills required for new job.
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Government Failure
When government intervention reduces economic welfare, leading to an allocation of resources worse than the free-market outcome.
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Other cards in this set

Card 2

Front

A statement including a value judgement of opinion.

Back

Normative Statement

Card 3

Front

The cost of giving up the next best alternative when making an economic decision.

Back

Preview of the back of card 3

Card 4

Front

Curve depicting various combinations of two products that can be produced when all resources are being used efficiently.

Back

Preview of the back of card 4

Card 5

Front

Increase in the potential level of real output the economy can produce over time.

Back

Preview of the back of card 5
View more cards

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