Transport

Airline alliances

An agreement between two or more airlines to cooperate. Used by scheduled airlines to increase their reach e.g. codesharing

1 of 215

Allocative efficiency

Scare resources are used in a way that maximises consumer satisfaction. Where price equals marginal cost

2 of 215

Allocatively efficient output

The level of output where MSB=MSC i.e. the socially optimal output level

3 of 215

Appraisal

A forward-looking assessment of proposals

4 of 215

Average cost

The cost of making one item - sometimes called unit cost or cost per unit of output

5 of 215

Average fixed cost

Total fixed costs of production divided by the quantity produced; unit fixed cost

6 of 215

Average revenue

The amount a firm receives per unit sold; another name for price

7 of 215

Barriers to entry

Obstacles preventing new firms entering a market

8 of 215

Barriers to exit

Obstacles that restrict existing firms from leaving a market e.g. sunk costs

9 of 215

Benefit Cost Ratio (BCR)

The ratio of the benefits of a project expressed in monetary terms, relative to its costs

10 of 215

Carbotage

The transport of passengers or fright within a country by a means of transport registered in another country e.g. a plane

11 of 215

Cartel

A group set up by rival firms to take common action e.g. agree prices, market share or exchange information on costs

12 of 215

Ceterus Paribus

"All other things equal"

13 of 215

Civil Aviation Authority (CAA)

The UK's aviation regulator

14 of 215

COBA

A compute model used by the DfT to estimate the monetary value of highway improvements

15 of 215

Codesharing

Two airlines share the same flight and sell tickets in their own name

16 of 215

Collusion

Cooperation of collaboration among rival firms e.g. an agreement not to compete on price

17 of 215

Competition

When rival firms contend for customers

18 of 215

Competition Commission

An independent public body which investigates situations where firms may exploit market power

19 of 215

Competition policy

Government action to promote rivalry between firms and reduce abuse of market power eg banning cartels or blocking mergers

20 of 215

Competitive market

A market made up of many rival firms who are free to enter or leave the industry

21 of 215

Concentration ratio

Measures the percentage of total market held by of the largest firms in the industry e.g. the top 4

22 of 215

Congestion

When demand exceeds supply on a given network at a given period in time e.g. bank holiday on holiday routes

23 of 215

Congestion charging

Drivers must pay to access a given zone e.g. central London

24 of 215

Consumer sovereignty

Buyers ultimately determine what is produced and how scarce resources are used by means of their purchases

25 of 215

Consumer surplus

The extra amount a consumer is willing to pay above the price actually paid for a product

26 of 215

Contestability

The extent to which firms can enter or leave a market without cost

27 of 215

Contestable market

A market that has no barriers to entry and no sunk costs

28 of 215

Contract logistics

Manufacturers outsource of transport and distribution activities

29 of 215

Cost Benefit Analysis

A technique for calculating the present monetary value of a stream of future net social benefits generated over the life of an investment project

30 of 215

Costs

Expenses of production; a payment incurred by a firm in producing a good or a service; monetary value of inputs used in production

31 of 215

Cross price elasticity of demand (XED)

The responsiveness of demand for one product to a change in the price of another product

32 of 215

Cross subsidisation

An internal subsidy where a firm uses profits from one activity to reduce the price of another product

33 of 215

Deadweight loss

The loss to society that occurs when firms produce where market price does not equal marginal cost

34 of 215

Demand for transport

The number of journeys consumers or firms are willing and able to purchase at various prices in a given time period

35 of 215

Demerit good

Products that have less private benefits than consumer recognise

36 of 215

Deregulation

When the government removes or simplifies legal restrictions on economic activity

37 of 215

Derived demand

When demand for a particular product depends on the demand for another product or activity

38 of 215

Discount rate

The interest rate chosen to establish the current present value of a future stream of costs or benefits

39 of 215

Discounting

A mathematical technique that establishes the present value of a future cost or benefit

40 of 215

Diseconomies of scale

Higher unit costs from increasing the size of operation; a rise in long run average costs from increases in the scale of production

41 of 215

Disequilibrium

A situation where there is a state of imbalance and so a tendency for change

42 of 215

Distribution

(1) the share of eg total income received by different groups (2) the methods used to get products from the manufacturer to the end consumer

43 of 215

Dominant monopoly

A firm with 40% or higher market share

44 of 215

Dynamic efficiency

Improvements in products, processes and productivity over time by exploiting economies of scale or successful investment in R&D

45 of 215

Economic activity

The production and distribution of good and services

46 of 215

Economic agents

Decision makers in economic models, e.g. consumer and producers

47 of 215

Economic efficiency

The best use of scare resources is being made; when both productive and allocative efficiency are achieved

48 of 215

Economic inefficiency

When resources are not being put to best possible because either allocative or productive efficiency is not achieved

49 of 215

Economies of scale

Benefits, in the form of lower unit costs, from increasing the size of operation; a fall in long run average costs from increases in the scale of production

50 of 215

Efficiency

Making the best use of scarce resources to satisfy consumer wants

51 of 215

Efficiency maximisation

When a firm selects the level of output and price that delivers allocative efficiency by producing where P=MC (marginal cost pricing)

52 of 215

Elasticity

A measure of the extent to which one variable (eg demand) responds to a change in a second variable (eg price)

53 of 215

Enterprise

The willingness to take business risks and organise production

54 of 215

Entrant firm

A business seeking to join a market and compete with incumbents

55 of 215

Entrepreneur

The individual who bears the risk of business by organising land labour and capital to produce output

56 of 215

Equilibrium

A state of balance

57 of 215

External benefits

The gain a consumer or producer’s economic activity creates for others, and for which no payment is made

58 of 215

External costs

The cost a consumer or producer’s economic decision imposes on others and for which no compensation is made

59 of 215

External diseconomies of scale

The disadvantages to a firm, in the form of higher unit costs, from being part of a growing industry

60 of 215

Externalities

The spill over effects of economic activity on others not directly involved in production or consumption of the product

61 of 215

Extrapolation

Taking existing trends and projecting into the future

62 of 215

Firm

An organisation that hires and organises resources to make products; a decision making business unit

63 of 215

Fixed costs

Expenses of production independent of the level of output; costs that do not change in the short run as output levels are varied

64 of 215

Flexible pricing

A firm varies price by customer to maximise revenue. Used in first degree price discrimination

65 of 215

Forecast

A statement of what is expected to happen in the future

66 of 215

Franchise

A firm wins a contract to operate a service on a given route for a set period of time

67 of 215

Freight transport

the carriage of goods between an origin and a destination

68 of 215

Game theory

A theory that predicts decision making in situations where economic agents are influenced by the actions and reactions of others

69 of 215

Globalisation

the process of ever closer links between national economies resulting in greater integration and interdependence

70 of 215

Goods

Tangible, physical products e.g. cars and computers

71 of 215

Government failure

State intervention that increases economic inefficiency in a market

72 of 215

Gross Domestic Product (GDP)

The total value of goods and services produced in an economy in a time period

73 of 215

Growth maximisation

When the firm's objective is to increase its size

74 of 215

HGV

Heavy Good Vehicle - a lorry

75 of 215

Hit and run compettion

Firms enter a market offering supernormal profits and withdraw if profits disappear

76 of 215

Holding stacks

Aircraft circling until space is available as an airport for them to land

77 of 215

Hub airport

A major airport offering a large number of direct flights to many other airports e.g. Heathrow

78 of 215

Hypothecation

The ring-fencing of taxes to finance spending in a particular area taxed, e.g. the use of congestion charges to subsidise public transoprt

79 of 215

Income elasticity of demand (YED)

The responsiveness of demand to a change in income

80 of 215

Incumbent firm

A business already operating a market

81 of 215

Independent goods

Two products that have no price-quantity demanded relationship: XED=0

82 of 215

Indirect tax

A compulsary charge imposed by the government on the sale of goods or services i.e. taxes on spending. A measure of sustainability

83 of 215

Industry

All those firms producing the same product

84 of 215

Inefficiency

When the best use of resources is not being made

85 of 215

Inelastic

When a variable (e.g. demand) is unresponsive to a change in a second variable (e.g. price)

86 of 215

Inferior good

Products for which an increase in income leads to a decrease in demand for that item

87 of 215

Information failure

Incomplete or inaccurate data means consumers or producers make different decisions than if they had full information

88 of 215

Infrastructure

The stock of capital used to support the economic system

89 of 215

Innovation

Technology advances lead to new or improved products or processes, that lead to a rise in productivity

90 of 215

Integrated transport

When different modes of transport work increasingly more effectively and efficiently together to create an easier travelling experience

91 of 215

Interchange

the location where different modes of transport meet

92 of 215

Interdependent

When economic agents are interlinked, e.g. trading partners become mutually dependent on one another for products

93 of 215

Intermediate output

Items sold to firms and used to make products, e.g. components and raw materials

94 of 215

Internal diseconomies of scale

The disadvantages to the firm of increasing size of operation, in the form of increasing unit costs

95 of 215

Internal economies of scale

The benefits to the firm of increasing size of operation, in the form of decreasing unit costs

96 of 215

International competitiveness

The ability of firms in an economy to match the price and quantity of other nation's output

97 of 215

Laissez faire

a view opposing state intervention in free markets beyond protecting property rights and ensuring law and order

98 of 215

Limit pricing

When firms set a low price to discourage rivals entering a market

99 of 215

Load factor

The percentage of capacity utilised in a journey, e.g. a loading factor of 80% means that 20% of the seats or space is unused in a journey

100 of 215

Logistics

The management of the flow and storage of materials from point of origin to point of consumption

101 of 215

Long run

The period of time needed for firms to alter the quantity of all factors used in production i.e. both labour and capital

102 of 215

Long run average cost curve (LRAC)

Shows the minimum unit cost of producing each level of output for each scale of operation of the firm

103 of 215

Loss

When total revenue fails to cover total costs

104 of 215

Marginal benefit

The gain from consuming one extra item

105 of 215

Marginal cost (MC)

The expense of making one extra item

106 of 215

Marginal returns

The extra output from a one unit increase in a variable output (e.g. labour) while other inputs (e.g. capital) are held constant

107 of 215

Marginal revenue (MR)

The income earned from selling one extra item

108 of 215

Market

Any place where buyers and sellers meet to exchange or trade products e.g. a shop or the internet

109 of 215

Market clearing price

The one price which leaves neither unsold products nor unsatisfied demand, i.e. equilibrium price

110 of 215

Market failure

When free markets make an inefficient use of scarce resources by failing to deliver allocative or productive efficiency

111 of 215

Market mechanism

Price movements act as a signal to consumers and producers to change their economic activity

112 of 215

Market power

The ability of the firm to influence market price by varying its own output

113 of 215

Market share

The proportion of total sales held by a firm expressed as a percentage

114 of 215

Market structure

The characteristics of a market eg number size and strength of firms and buyers and barriers to entry and exit

115 of 215

Maximum price

When government sets a price ceiling market price cannot exceed

116 of 215

Minimum efficient scale (MES)

The lowest level of output needed to exhaust all potential economies of scale and so allow firms produce at lowest unit cost

117 of 215

Modal shift

The movement of people from one form of transport to another for a particular journey eg from car to bus or train while commuting

118 of 215

Mode of transport

A method of transferring passengers and freight from one destination to another

119 of 215

Monopolistic competition

A market structure with few barriers to entry where many firms produce differentiated products

120 of 215

Monopoly

A single firm in an industry. A market structure where a single supplier with high barriers to entry supplies a unique product

121 of 215

Nationalisation

The transfer of ownership of a firm from the private to public sector

122 of 215

Natural monopoly

A capital intensive industry with such substantial economies of scale that one firm can produce output at lower unit cost than two or more firms

123 of 215

Negative externalities

When production or consumption imposes costs on third parties who receive no compensation

124 of 215

Net present value

The value today of a stream of future benefits or costs over the life of the project, discounted at a given interest rate (the discount rate)

125 of 215

Normal profit

The minimum amount that must be received to keep a firm in its current industry. A cost of production

126 of 215

Objective

The aim of a firm e.g. maximise profits

127 of 215

Office of Fair Trading

A government agency responsible UK competition policy ie making markets work well for consumers

128 of 215

Oligopoly

A market structure with high barriers to entry where a few large firms dominate the market

129 of 215

Open skies policy

An agreement between two countries to extend unrestricted landing rights at each other’s airports to each other’s airlines

130 of 215

Opportunity cost

The best alternative sacrificed when a choice is made. The opportunity cost of more leisure time is the lost wages sacrificed.

131 of 215

Optimum output

An efficient level of output which delivers both productive and allocative efficiency

132 of 215

Pareto efficiency

When resources cannot be reallocated without making someone else worse off

133 of 215

Passenger kilometre

Distance travelled x number of people in the vehicle

134 of 215

Pay off matrix

A table summarising the impact on two firm’s profit of a pricing decision

135 of 215

Peaking

Occurs when demand exceeds supply on a given network at a given time causing congestion eg rush hours and bank holidays

136 of 215

Perfect competition

A market structure with no barriers to entry where many firms produce identical products

137 of 215

Policy

A plan of action designed to meet set objectives

138 of 215

Pigou effect (Polluter pays principle)

Using indirect taxes to increase price to the point where negative externalities are covered. Externalities are internalised

139 of 215

Positive externalities

When economic decisions generate benefits for third parties for which they do not pay

140 of 215

Predict and provide

When traffic levels are forecast and new capacity is added to match projected future passenger and freight levels to avoid future congestion

141 of 215

Price discrimination

Where a firm charges different prices in different sub markets for the same product, for reasons not associated with production costs

142 of 215

Price elasticity of demand (PED)

The responsiveness of demand to a change in the price of the product

143 of 215

Price elasticity of supply (PES)

The responsiveness of supply to a change in the price of the product

144 of 215

Price leadership

When a dominant firm sets market price and rivals follow its price changes

145 of 215

Price mechanism

Price movements act as a signal to consumers and producers to change their economic activity

146 of 215

Price rigidity

The situation where the price of a product rarely changes

147 of 215

Price system

A method of allocating resources using price changes. Consumers and producers adjust their economic activity as prices change

148 of 215

Private benefits

The gain to individuals or firms of consuming or producing an item

149 of 215

Private costs

The costs to individuals or firms of consuming or producing a good or a service

150 of 215

Private financing initiative

A method of financing pubic private partnerships (PPP)

151 of 215

Private goods

Products which are both rival and excludable

152 of 215

Private sector

That part of the economy made up of households and firms controlled by private individuals

153 of 215

Privatisation

The transfer of ownership of a firm from the public to private sector

154 of 215

Producer surplus

The extra amount a producer is paid for a product above what they are willing to accept to supply the product

155 of 215

Product differentiation

The processes of making a firm’s product look distinct from the output of competitors. Usually achieved through branding and advertising

156 of 215

Productive efficiency

When output is maximised from give inputs. This means products are made with the lowest possible unit cost (AC=MC)

157 of 215

Productivity

The amount of output created per unit of input good

158 of 215

Profit

The difference between total revenue and total cost; income left over from revenue once all costs are paid.

159 of 215

Profit maximisation

When a firm selects the level of output and price to gain the most profit possible by producing where MC=MR

160 of 215

Public goods

Products which are both non- rival and non-excludable and so will not be supplied by the free market

161 of 215

Public private partnerships (PPP)

Joint ventures between private sector firms and public sector agencies eg Metronet and London Underground

162 of 215

Public sector

That part of the economy made up central government local government, and public corporations

163 of 215

Public transport

Any form of transport not owned by the traveller eg trains and buses

164 of 215

Quasi-public good

A product that has many but not all the characteristics of a public good ie almost non-rival and almost non-excludable e.g. a road

165 of 215

R&D

Research and development

166 of 215

Red tape

Official rules and procedures causing time delay and increased transaction costs

167 of 215

Regulations

Legally enforced rules that restrict or ban specified activities

168 of 215

Regulatory barriers

Government regulations that restrict the ability of firms to enter a market eg an operating licence

169 of 215

Revenue

The amount of money a firm receives from the sale of its output; receipts from sales

170 of 215

Risk

The possibility of difficulty or loss from a business activity

171 of 215

Road pricing

Charging road users for their use of a particular highway or zone

172 of 215

Satisficing

In setting objectives managers balance the conflicting views of stakeholders and seek acceptable ‘compromise’ outcomes. No one target is maximised.

173 of 215

Scale of production

The level of output achieved by a firm - determined by the amount of capital and labour employed

174 of 215

Semi fixed costs

Costs that are fixed for a given level of activity but increase if an operator decides to supply an additional service

175 of 215

Services

Non-physical, intangible products such as banking and education

176 of 215

Shadow prices

The estimated price of products which have no market and so no market price eg noise pollution

177 of 215

Short run

The period of time when the quantity of one factor of production, usually labour, is fixed

178 of 215

Social benefits

The total gain to society of a given economic activity taking account of both private benefits and positive externalities

179 of 215

Social costs

The total cost to society of a given economic activity taking account of both private costs and negative externalities

180 of 215

Social exclusion

Low income groups are denied access to goods and services normally available to members of society eg healthcare

181 of 215

Social responsibility

The obligation a business has to consider the interests of its stakeholders

182 of 215

Socially optimum output

The level of output which maximises consumer welfare by producing where MSB=MSC

183 of 215

Stakeholder conflict

When different stakeholders have conflicting objectives

184 of 215

Stakeholders

Groups who have an interest in the activity of a firm eg shareholders, managers, staff, customers, government and local communities

185 of 215

Standards

Required levels of behaviour from economic agents enforced by law eg a ban on fly- tipping

186 of 215

State provision

Governments supply goods and services eg education, health and housing

187 of 215

Static efficiency

Efficiency occurring in a single time period ie efficiency now

188 of 215

Subsidy

A payment made by the government to consumers or producers to encourage consumption or production

189 of 215

Substitues

Alternative products that can be used to satisfy the same given want or need eg butter or margarine

190 of 215

Sunk costs

Costs that cannot be recovered if a firm leaves an industry

191 of 215

Supernomal profit

Any extra profit made in excess of normal profit. Firms earn supernormal profits when total revenue exceeds total cost.

192 of 215

Supply

The amount of a product firms are willing and able to provide at different market prices in a given time period, eg one month

193 of 215

Sustainability

Meeting the needs of the present without compromising the ability of future generations to meet their own needs ie capacity for continuance

194 of 215

Tertiary sector

The part of the economy that creates services eg transport, tourism, banking, insurance and retail

195 of 215

Tonne kilometre

The weight of fright lifted x the distance carried

196 of 215

Total costs

Total amount of money a firm receives from selling a given level of output

197 of 215

Total revenue

Total amount a firm receives from selling a given level of output

198 of 215

Tradable permits

Government issued licences allowing firms to emit a specified amount of pollutant eg C02. Firms can buy and sell permits in a market.

199 of 215

Trade off

The process of making a choice between alternatives eg deciding if is worth sacrificing a new car for a holiday in Hawaii

200 of 215

Traffic forecasts

Estimates of how many passengers, vehicle and freight are likely to travel by a given mode in the future.

201 of 215

Train operating companies (TOCs)

Have a time limited franchise to run rail services over given routes eg Virgin Trains

202 of 215

Transport infrastructure

Capital items such as roads and rail networks, airports that facilitate the movement of goods and people

203 of 215

Transport operations

Decisions about the type of transport mode to use (demand) or provide (supply)

204 of 215

Transport organisation

The structure of transport operations in terms of private or public sector ownership and responsibilities

205 of 215

Turnarounds

The process of preparing a flight for the next departure and landing

206 of 215

Unit cost

The cost on average of producing one item - average costs (AC)

207 of 215

User cost changes

When the user benefits from a road improvement scheme

208 of 215

Value

The amount of money received given by price x quantity

209 of 215

Variable costs

Costs directly related to the level of output

210 of 215

VAT

Value added tax eg 20% is added onto the selling price of most products in the UK

211 of 215

VED

Vehicle excise duty is a tax paid for a licence for a car to use public roads - tax discs

212 of 215

Welfare loss

The amount by which consumer surplus is reduced when output is not a the social optimum - a measure of lost efficiency

213 of 215

White paper

An official report outlining government policy in a certain area eg transport

214 of 215

X-inefficiency

Wa firm uses more inputs than are necessary for a given level of output

215 of 215

Get Revising

Transport

Other cards in this set

Card 2

Front

Back

Card 3

Front

Back

Card 4

Front

Back

Card 5

Front

Back

Comments

Similar Economics resources:

Other cards in this set

Card 2

Front

Back

Card 3

Front

Back

Card 4

Front

Back

Card 5

Front

Back

Comments

Related discussions on The Student Room

Similar Economics resources: