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54 Cards in this Set
- Front
- Back
factors of production |
inputs to the production process - land labour, capital (+enterprise/entrepreneurship) |
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renewable resources |
resources that can be exploited over and over again as they have the potential to renew themselves (trees, fish) |
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non-renewable resources |
resources that cannot be replaced once exploited (coal, oil) |
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consumer goods |
goos and services used by people to satisfy their wants and needs |
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capital goods |
goods and services used in production of other goods (factories, offices, roads, machines) |
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economic problem (scarcity) |
resources must be sallocated between competing uses as there's infinite wants, finite resources |
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opportunity cost |
the benefits forgone of the next best alternative
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free goods |
goods that are unlimited in supply, and therefore have no opportunity cost |
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positive statements |
a statement that can be supported or refuted by evidence |
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normative statements |
a statement that can't be supported or refuted due to the presence of a value judgement |
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utility (/economic welfare) |
the satisfaction or benefit derived from consuming a good or set of goods |
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market |
any convenient set of arrangements by which buyers and sellers communicate to exchange goods and services |
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price mechanism |
the means by which millions of decisions taken by consumers and businesses interact to determine the allocation of scarce resources between competing uses (rationing, signalling, incentive) |
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demand |
the quantity of a good or service that consumers are willing and able to buy at a given price in a given time period |
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supply |
the quantity of a good or service that producers are willing and able to supply at a given price in a given period of time |
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effective demand |
aggregate actual demand in an economy supported by the consumer's capacity to pay |
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(law of) diminishing marginal utility |
the value or utility that individual consumers gain from the last product consumed falls the greater the number consumed |
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consumer surplus |
the difference between how much buyers are prepared to pay for a good and how much they actually pay |
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producer surplus |
the difference between how much producers are willing to supply a good for, and the price they actually receive for the good |
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complements |
a good that is purchased with another good to satisfy a want (negative XED) |
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substitutes |
a good which can be replaced by another to satisfy a want (positive XED) |
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cross elasticity of demand (XED) |
the responsiveness of quantity demanded of one good to a change in price of another good (%change Q-goodA / %change P-goodB) |
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derived (joint) demand |
the demand placed on a good or service for its ability to acquire or produce another good or service |
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composite demand |
where a good or service has multiple uses, so that an increase in demand for one product leads to a fall in supply of the other |
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joint supply |
where, as a product or process can yield two or more outputs, the increase in supply of one good results in an increase in supply of the resulting good |
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price elasticity of demand (PED) |
the responsiveness of a demand for a good/service to a change in price |
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income elasticity of demand (YED) |
the responsiveness of demand to a change in income (%change D / %change Y) |
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price elasticity of supply (PES) |
the responsiveness of supply to a change in price (%change in Q / %change P) |
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indirect tax |
a tax that is passed onto the consumer as part of the price of the good or service they are purchasing |
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specific (or unit) tax |
tax levied on volume - there is a fixed amount for each unit sold |
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ad valorem tax |
tax levied as a percentage of the value of the good |
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subsidy |
a grant given which lowers the price of a good, usually designed to encourage production or consumption of a good |
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production possibility frontier |
maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently employed |
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specialisation |
a system of organisation where economic units are not self sufficient but concentrate on producing certain goods and services and trading the surplus with others |
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division of labour |
specialisation by workers who perform different tasks at different stages of production to make a good or service, in co-operation with other workers |
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free economy |
an economic system that resolves the basic economic mainly through the market mechanism |
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command economy |
an economic system where government, through a planning process, allocates resources in society |
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mixed economy |
an economy where both the free market mechanism and the government planning process allocate significant proportions of total resources |
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market failure |
where resources are inefficiently allocated due to imperfections in the working of the market mechanism |
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public good |
a good which possesses the characteristics of non-rivalry and non-excludability |
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non-excludability |
once provided, it is impossible to prevent any economic agent from consuming the good |
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non-rivalry |
consumption by one economic agent does not reduce the amount available for consumption by others |
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free rider |
a person or organisation which receives benefits that others have paid for without making any contributions |
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private good |
a good which possesses the characteristics of rivalry and excludability |
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subsidised provision |
when the government pays for part of the good or service but expects the consumer to pay the rest |
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privatisation |
the act of transferring ownership of business operations from a government organisation to a privately owned entity |
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asymmetric information |
where buyers and sellers have different amounts of information, with one group having more info than the other |
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negative externality / external cost |
where net social cost (social cost - social benefit) > net private cost (private cost - private benefit) |
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private cost |
the cost of an activity to a single economic unit |
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social cost |
the cost of an activity to society as a whole |
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private benefit |
the benefit of an activity to a single economic unit |
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positive externality / external benefit |
where net social benefit (social benefit - social cost) > net private benefit (private benefit - private cost) |
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social benefit |
the benefit of an activity to society as a whole |
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internalising the externality |
the act of making a change in a company's private costs or benefits in order to make them equal to the company's social costs or benefits |