Microeconomics

?
  • Created by: rohanm17
  • Created on: 30-01-19 19:52
Abnormal Profit
Profit over and above normal profit and in the absence of entry barriers performs an imporant economic function of attracting new firms into the market.
1 of 90
Absolute Poverty
A condition characterized by severe lack of basic human needs like shelter and clean water.It depend not only on income by also access to services.
2 of 90
Adverse selection
A situation where people who buy insurance have a better idea of the risks they face compared to the seller of insurance. People with larger risks are more likely to buy insurance than people who face smaller risks.
3 of 90
Allocative efficiency
Reallocation of resources between markets which improves overall economic welfare. For this to happen P=MC in every market.
4 of 90
Altruism
Concern of the welfare of others
5 of 90
Artificial barriers
Barriers erected by the firm themselves like patents and high levels of advertising.
6 of 90
Asymmetric information
Where one party of a market posses greater material knowledge than other parties in the market.
7 of 90
Availability Bias
Individuals make judgment about future events based on how easy it is to recall examples of similar events.
8 of 90
Average cost of labour
Total wage costs divided by the number of workers employed.
9 of 90
Average returns of labour
Total output divided by the total numbers of workers employed
10 of 90
Market failure
When a market mechanism leads to a miss-allocation of resources in an economy either completely failing to provide a good or service or providing the wrong quantity
11 of 90
Externalities
Third party effects arising from production and consumption of goods and services for which no appropriate compensation is paid.
12 of 90
Law of diminishing return
Short term law which states that as a variable factors of production is added to a fixed factor of production, eventually both the marginal and average return will fall.
13 of 90
Return to scale
Long term Law which measures the rate at which output changes when the scales of factors of production are changed.
14 of 90
Behavioral economics
A method of economic analysis that applies psychological insight into human behavior to explain how individuals make choices and decisions
15 of 90
Bounded rationally
when making decisions, an individual is rationally limited to the information they have and the time available in which to make decisions.
16 of 90
Cartel
A collusive agreement made by firms to limit prices or to restrict output
17 of 90
Choice architecture
Different ways in which choices can be presented to consumers, and the impact of that presentation on consumer decision making
18 of 90
Collective bargaining
A process where which wage rates and other conditions of work are negotiated and agreed by a union with an employer
19 of 90
Competition Market Authority
Government agency responsible for advising on and implementing UK competition policy
20 of 90
Competition policy
Is a government microeconomic policy which aims to make goods market more competitive
21 of 90
Condition of demand, Contraction and Extension
Condition of demand are factors which fix the position of the demand curve and changes will shift the demand curve. Contraction is a movement up a demand curve with a increase in the goods price.Extension is a movement down a demand curve fall in P
22 of 90
Consumer surplus
A measure of the economic welfare enjoyed by consumers: difference between the maximum price a consumer is prepared to pay and the market price which he or she has to pay
23 of 90
Consumption externalities
When consumption imposes external costs and benefits to a third party without this being reflected in the market price.
24 of 90
Contestable market
A market in which the potential exists for new firms to enter the market with low sunk costs.
25 of 90
Contractualisation
Where services privouly provided by the public sector are put to private sector tender and then provided by the private sector firms
26 of 90
Producer surplus
A measure of the economic welfare enjoyed by producers:difference between the minimum price a producer is prepared to charge and the market price of the good or service.
27 of 90
Creative destruction
Capitalism evloving and renewing itself over time through new technologies and innovations replacing older technologies and innovations
28 of 90
Deadweight loss
Loss of economic welfare when the maximum attainable level of total welfare is not achieved
29 of 90
Demerit good
A good for which the private benefit of consumption are greater than the social benefits of consumption
30 of 90
Divorce of ownership from control
The owners and those who manage the firm are different groups with different objectives
31 of 90
Dynamic efficiency
Occurs in the long-run leading to development of new products and more efficient processes that improve productive efficiency
32 of 90
Economic sanctions
Restrictions imposed by regulation or laws that restrict an individuals freedom to behave in certain ways.Breaking a sanction can lead to punishment.
33 of 90
External diseconomies and economies of scale
Changes in the long-run average costs of production resulting from the growth of the market or industry of which the firm is a part.
34 of 90
Free-rider problem
This occurs when people can benefit from a good/service without paying anything towards it.If enough people can enjoy a good without paying for the cost then there is a danger that, in a free market, the good will be under-provided or missing market
35 of 90
Gini coefficient
Measures the extent to which the distribution of income or wealth among individuals or households within an economy deviates from a perfectly equal distribution.
36 of 90
Government failure
Occurs when government intervention in the economy makes the allocation of resources worse. The intervention may be ineffective ,wasteful and/or damaging.
37 of 90
Hypothesis of marginal diminishing marginal utility
For a single consumer the marginal utility derived from a good or service diminishes for each additional unit consumed
38 of 90
Innovation
Improvements made to something that has already been invented thereby turning the result of invention into a product.
39 of 90
Internal economies and diseconomies of scale
Changes in long run average costs of production resulting from changes in the size or scale of a firm or plant.
40 of 90
Limit prices
Prices set low enough to make it unprofitable for other firms to enter the market.
41 of 90
Mandated chocie
People are required by law to make a decision
42 of 90
Marginal cost
Addition to total cost resulting from producing one additional unit of output
43 of 90
Marginal revenue
Addition to total revenue resulting from selling one additional unit of the pproduct
44 of 90
Marginal Utility
The additional welfare, satisfaction or pleasure gained from consuming one extra unit of a good
45 of 90
Market conduct
The price and other market policies presued by firms which is also known as market behavior
46 of 90
Mechanisation
Process of moving from a labour-intensive to more capital-intensive method of production,employing more machines and fewer workers
47 of 90
Merit good
A good frow hich thee social-benefits of consumption exceed the private benefits of consumption.
48 of 90
Minimum efficient scale
The lowest output at which the firm is able to produce at the minimum achievable LRAC
49 of 90
Monopoly power
Firms which posses significant power in the market ,like power over price setting and other aspects of the market such as product differentiation
50 of 90
Monopsony
There is only one buyer in a market
51 of 90
National living wage
An adult wage rate, set by the UK government which all employers must pay
52 of 90
National minimum wage
A minimum wage or wage rate that must be law be paid to employees by employers.
53 of 90
Natural barriers
Barriers that result from features of the industry,such as economies of scale or high research costs.
54 of 90
Negative Externalities
Cost that is suffered by a third party as a result of a economic transaction e.g.pollution
55 of 90
Non-excludability
A property of a public good which means that if it is provided for one person it is provided for all.
56 of 90
Non-rejectability
A property of a public good which means that if the good is provided, it is impossible for a person to "opt out" and not gain its benefits
57 of 90
Non-rivalry
A property of a public good which means that when a good is consumed by one person, it does not reduce the amount available to others.
58 of 90
Normal profit
The minimum profit a firm must must make to stay in business however is inefficient to attract new firms into the market.
59 of 90
Optimum firm size
The size of a firm capable of producing at the lowest average cost and thus being productively efficient
60 of 90
Partial Market failure
When a market does function,but it delivers the wrong quantity of a good or service which result in resource mis-allocation
61 of 90
Positive externalities
A benefit which is enjoyed by a third party as a result of a an economic transaction e.g. beautiful gardens
62 of 90
Predatory prices
Strategy where prices are set below the average costs with the aim of forcing rival firms out of business
63 of 90
Price agreements
An agreement made by economic agents regarding the pricing of a good or service
64 of 90
Price discrimination
Charging different prices to different consumers for the same product or services with the price based on different consumers willingness to pay
65 of 90
Price Leadership
The setting of prices in a market usually by a dominant firm which is followed by other firms in the same market
66 of 90
Price war
Occurs when rival firms continuously lower prices to undercut each other.
67 of 90
Private costs and benefits
Private costs and benefits are costs/benefits incurred by an individual or firm as a result of their own activities.
68 of 90
Private goods
A good which exhibits characteristics of extendibility and rivalry
69 of 90
Privatisation
The transfer of assets from a public sector to the private sector
70 of 90
Production externalities
When production of a good or a service imposes external costs or benefits on third party outside of the market without these being reflected in the market price
71 of 90
Productive efficiency
When firms are producing on their ATC curve and therefore average costs of production are minimised
72 of 90
Progressive taxation
A tax is Progressive when as income rises, a greater proportion of income is paid in taxation.
73 of 90
Property rights
The exclusive authority to determine how a resource is used.
74 of 90
Public goods
A good which exhibits the characteristics on non-exludability and non-rivalry
75 of 90
Public ownership
Ownership of industries, firms and other assets by the local government, also called nationalisation
76 of 90
Public-private ownership
Partnership between the private and public sectors to provide public services
77 of 90
Quantity setter and Price setter/maker
When a firm faces a downward sloping demand curve for its product,it possesses the market power to set the quantity of the good it wishes to sell or the price at which it sells the product.
78 of 90
Quasi-public good
A good which has characteristics of both public and private good
79 of 90
Regulation
The imposition of rules which restrict freedom of economic action
80 of 90
Restricted choice
Offering people a limited number
81 of 90
Social costs and benefits
Social costs are costs which fall on the whole of society: Social cost= Private cost+ external costs. social benefits are benefits enjoyed by the whole of society :Social benefit= private benefit+ external benefit
82 of 90
Static efficiency
Productive and allocative efficiency at a particular point in time
83 of 90
Substitution effect
A higher hourly wage rate makes work more attractive than leisure, so workers substitute labour for leisure
84 of 90
Sunk costs
costs that have already been incurred and cannot be recovered
85 of 90
Technological change
Effect of innovation and invention and the diffusion or spread of technology in the economy.
86 of 90
Trade union
A group of workers who join together to maintain and improve their conditions of employment including their pay.
87 of 90
Utility
The satisfaction or economic welfare an individual gains from consuming a good or service
88 of 90
Wage discrimination
Paying different workers different wage rates for doing the same job
89 of 90
Wealth
Personal wealth is assets which a individual person or household owns at a particular point in time
90 of 90

Other cards in this set

Card 2

Front

A condition characterized by severe lack of basic human needs like shelter and clean water.It depend not only on income by also access to services.

Back

Absolute Poverty

Card 3

Front

A situation where people who buy insurance have a better idea of the risks they face compared to the seller of insurance. People with larger risks are more likely to buy insurance than people who face smaller risks.

Back

Preview of the back of card 3

Card 4

Front

Reallocation of resources between markets which improves overall economic welfare. For this to happen P=MC in every market.

Back

Preview of the back of card 4

Card 5

Front

Concern of the welfare of others

Back

Preview of the back of card 5
View more cards

Comments

No comments have yet been made

Similar Economics resources:

See all Economics resources »See all Competitive markets resources »