yr13 1st term economics (key words)

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  • Created by: tkaysav
  • Created on: 29-10-20 22:25
rational behaviour
acting in pursuit of self interest, maximising welfare, satisfaction or utility from goods and services consumed
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utility
the satisfaction or economic welfare gained from consuming a good or service
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marginal utility
the additional satisfaction, welfare or benefit gained from the consumption of one extra unit of a good
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behavioural economics
a method of economic analysis that applies psychological insight into human behaviour to explain how individuals make choices and decisions
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nudge
nudging strategies are what governments can employ to alter consumer behaviour (in order to address market failure) e.g advertising
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bounded rationality
where an individual , however intelligent is not able to make totally 100% rational decisions
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cognitive bias
means a consistent mistake in reasoning as a result of ones own preferences, past experience or beliefs, regardless of contrary information
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status-quo bias
where people tend to prefer things to remain the same, fearful or what might change
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memory bias
where something makes it easier/harder to remember with greater/less accuracy e.g emotional events from long ago are easily remembered compared to recent emotionally neutral events
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observational selection bias
assuming (wrongly) that something has become more common just because you have started noticing it where previously you hadn't
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in group bias
valuing those closer to us (our in group) more highly than those we don't really know
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positive expectation bias
where people believe that bad luck has to change eventually - for instance gamblers who have repeatedly lost keep going on the basis that their luck must change
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post purchase rationalisation
where having bought something that you didn't need or that turns out not to be as good as it should have been, you look for reasons to justify a poor decision
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neglecting probability
means not grasping the relative likelihood of outcomes: usually associated with under or over estimating risks or benefits e.g over estimating your chance of becoming famous
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negativity bias
the tendency to pay more attention to bad things than good things: companies have complaint departments but seldom have compliment departments
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bandwagon effect bias
where people 'follow the herd' follow fashion, keep up with the joneses, don't want to be left behind etc.
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current moment bias
means short term-ism where immediate benefits are valued more highly than future benefits or costs
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availability bias
occurs when individuals make judgements about the likelihood of future events based on how quickly examples of similar events spring to mind
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conformation bias
means that we often look to have our existing views confirmed rather than challenged so we tend to believe evidence that supports our view and dismiss evidence that does not
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mandated choice
is where people are required by law to make a decision between alternatives e.g in Australia voting in a general election is compulsory
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restricted choice
people are baffled by too many options to choose from and tend to make poor choices or not bother at all. deliberately restricting choices to a manageable amount avoids this.
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average returns of labour
total output / total number of workers
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marginal returns of labour
the change in the total output resulting from hiring one more worker ( all other FOP's remaining fixed)
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increasing returns to scale
when all FOP increase, the returns (output) increases proportionately more. e.g 10% increase in FOP causes a 15% increase in output
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constant returns to scale
where the increase is in the same proportion. e.g 10% increase in FOP causes a 10% increase in output
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decreasing returns to scale
where the increase is proportionately less. e.g a 10% increase in FOP causes a 5% increase in output
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marginal revenue
the addition to total revenue resulting from the sale of one more unit
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profit
the difference between total sales revenue and total costs of production
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normal profit
the minimum level of profit a firm must make to stay in business but which is too small to attract new firms into the market
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abnormal (supernormal) profit
profit above the level of normal profit which therefore attracts new firms into the market
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technological change
described the overall effect of innovation, invention and the spread of technology in the economy
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innovation
turns an invention into marketable products also the subsequent development/ refinement/ improvement of the product
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mechanisation
moving from labour intensive to more capital intensive methods of production. machinery > employees
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automation
removing human operators from process altogether. e.g computer controlled assembly line robots
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productive efficiency
happens when producing at the level where its average production costs are minimised technological change leads to lower costs, shifting the curves down
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dynamic efficiency
measures change in productive efficiency over time, a dynamically efficient firm is one that is able to innovate and improve productive efficiency not just as one-off but in a continual / sustained manner
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disruptive innovation
is innovation that creates new markets but in doing so challenges and potentially destroys existing markets
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sustaining innovation
does not create new markets but instead improves/ refines existing products
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creative destruction
is the process by which capitalism evolves and renews itself over time through new technologies and innovations
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satisficing
achieving a satisfactory outcome rather than the best possible outcome
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Other cards in this set

Card 2

Front

the satisfaction or economic welfare gained from consuming a good or service

Back

utility

Card 3

Front

the additional satisfaction, welfare or benefit gained from the consumption of one extra unit of a good

Back

Preview of the back of card 3

Card 4

Front

a method of economic analysis that applies psychological insight into human behaviour to explain how individuals make choices and decisions

Back

Preview of the back of card 4

Card 5

Front

nudging strategies are what governments can employ to alter consumer behaviour (in order to address market failure) e.g advertising

Back

Preview of the back of card 5
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