Microeconomics- Key words- A-D

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  • Created by: H
  • Created on: 10-03-13 12:09
Absolute poverty
Measures the number of people living below a certain income threshold or the number of households unable to afford certain basic goods and services.
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Ad valorem tax
An indirect tax based on a percentage of the sales price of a good or service. The best known example in the UK is Value Added Tax
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Advertising
Developing consumer loyalty by establishing branded products can make successful entry into the market by new firms much more expensive. Advertising can cause an outward shift of the demand curve and also make demand less sensitive to changes in pric
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Ageing population
An increase in the average age of the population arising from an increase in life expectancy and a fall in the birth rate. In the long run, an ageing population has important implications for both the level and pattern of demand in the economy.
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Allocative efficiency
Occurs when the value that consumers place on a good or service (reflected in the price they are willing and able to pay) equals the cost of the resources used up in production.
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Anti-competitive behaviour
Anti-competitive practices are strategies operated by firms that are deliberately designed to limit the degree of competition in a market.
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Asymmetric Information
Asymmetric information occurs when somebody knows more than somebody else in the market. Such asymmetric information can make it difficult for the two people to do business together.
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Average product
Total output divided by the total units of labour employed
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Black market
A black market (or shadow market) is an illegal market in which the normal market price is higher than a legally imposed price ceiling (or maximum price). Black markets develop where there is excess demand (or a shortage) for a commodity.
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Example of a black market
Tickets for major sporting events, rock concerts and black markets for children's toys and designer products that are in scarce supply.
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Brand
A distinctive product offering which is created by the use of a logo, symbol, name, design, packaging or combination thereof. The key in designing and building a brand is to differentiate it from competitors.
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Brand loyalty
When consumers regard one particular brand of a product differently from competing products. can be seen as a potential entry barrier in a market. It makes it more difficult and costly for a new product to break into the market.
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Buffer stock schemes
A scheme that buys surplus produce in periods of abundance and sells stock in periods of shortage, in order to stabilise the market price.
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Capital
Capital means investment in goods that are used to produce other goods in the future. Fixed capital includes machinery, plant and equipment, new technology, factories and buildings - all of which are capital goods designed to increase the productity
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Capital goods
Producer or capital goods such as plant (factories) and machinery are useful not in themselves but for the goods and services they can help produce in the future.
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Capitalist economy
An economic system organised along capitalist lines uses market-determined prices. Resources are privately owned and managed. State intervention is kept to a minimum.
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Cartel
A producer cartel seeks to maximise joint profits in a market by engaging in price fixing. This can be achieved by controlling market output
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Ceteris paribus
Ceteris paribus means all other things being equal- an assumption that all other factors are held equal
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Choices
Because of scarcity, choices have to be made on a daily basis by individual consumers, firms and governments. Making a choice made normally involves a trade-off - in simple terms, choosing more of one thing means giving up something else in exchange.
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Collusion
Is any explicit or implicit agreement between suppliers in a market to avoid competition. The main aim of this is to reduce market uncertainty and achieve a level of joint profits similar to that which might be achieved by a pure monopolist.
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Common Agricultural Policy (CAP)
Its main objectives are to ensure a fair standard of living for farmers and to provide a stable and safe food supply at affordable prices for consumers. Very controversial. Within the EU
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Competition Commission
carries out inquiries into matters referred to it by the other UK competition authorities concerning monopolies, mergers and the economic regulation of utility companies.
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Competitive market
A competitive market is one where no one firm has a dominant position and where the consumer has plenty of choice when buying goods or services. Firms in a competitive market each have a small market share.
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Command economy
An economy which allocates its resources predominately through the direction of a central planning authority
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Command-and-control (CAC)
The use of law and regulation backed up by inspection and penalties for non-compliance
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Competition policy
Government policy directed at encouraging competition in the private sector, e.g. the investigation of takeovers or restrictive practices.
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Complements
A pair of good that are consumed together, i.e. a negative cross-price elasticity of demand
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Consumer surplus
The difference between the total value consumers place on the units consumed of a good or service and the payment required that the quality consumed.
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Cost benefit analysis (CBA)
An investment appraisal tool used to weigh up the social benefits of a project against the social costs.
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Cross-price elasticity of demand
Measures the responsiveness of demand to a change in the price of a related good or service
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Competitive supply
Goods in competitive supply are alternative products a firm could make with its resources. E.g. a farmer can plant potatoes or carrots. An electronics factory can produce VCRs or DVDs.
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Complementary goods
Two complements are said to be in joint demand. Examples include: fish and chips, DVD players and DVDs. A rise in the price of a complement to Good X should cause a fall in demand for X.
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Complementary goods 2
A fall in the price of a complement to Good Y should cause an increase in demand for Good Y.
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Composite Demand
Where goods or services have more than one use so that an increase in the demand for one product leads to a fall in supply of the other.
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Consumer surplus
is a measure of the welfare that people gain from the consumption of goods and services, or a measure of the benefits they derive from the exchange of goods.
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Consumer surplus 2
Consumer surplus is the difference between the total amount that consumers are willing and able to pay for a good or service (indicated by the demand curve) and the total amount that they actually pay (the market price).
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Consumption
Consumption is the use of a good or a service by consumers (households) to satisfy a want or a need
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Contestable market
A contestable market has no entry barriers - firms can enter or leave an industry costlessly. The threat of potential entry encourages imperfectly competitive to set price and output at or close to the competitive price and output
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Corporate Social Responsibility
There is growing interest in the concept of ethical businesses and corporate social responsibility
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Costs
Costs are those expenses faced by a business when producing a good or service for a market.
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Demand
Demand is defined as the quantity of a good or service that consumers are willing and able to buy at a given price in a given time period. Each of us has an individual demand for particular goods and services.
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Demand curve
A demand curve shows the relationship between the price of an item and the quantity demanded over a period of time.
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De-merit goods
De-merit goods are thought to be 'bad' for you. Examples include alcohol, cigarettes and various drugs. The consumption of de-merit goods can lead to negative externalities which causes a fall in social welfare.
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Derived demand
The demand for a factor of production that results from the demand for the product that is used to make.
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Diminishing returns
Occurs because factors of production are not perfect substitutes for each other. Resources used in producing one type of product are not necessarily as efficient when switched to the production of another good or service.
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Diseconomies of scale
When a business expands beyond a certain size, average costs per unit may start to increase. This is known as diseconomies of scale.
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Division of labour
The breaking of a production process into separate, sequential tasks leading to workers specialising
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Other cards in this set

Card 2

Front

An indirect tax based on a percentage of the sales price of a good or service. The best known example in the UK is Value Added Tax

Back

Ad valorem tax

Card 3

Front

Developing consumer loyalty by establishing branded products can make successful entry into the market by new firms much more expensive. Advertising can cause an outward shift of the demand curve and also make demand less sensitive to changes in pric

Back

Preview of the back of card 3

Card 4

Front

An increase in the average age of the population arising from an increase in life expectancy and a fall in the birth rate. In the long run, an ageing population has important implications for both the level and pattern of demand in the economy.

Back

Preview of the back of card 4

Card 5

Front

Occurs when the value that consumers place on a good or service (reflected in the price they are willing and able to pay) equals the cost of the resources used up in production.

Back

Preview of the back of card 5
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