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21 Cards in this Set
- Front
- Back
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A Free Market
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There are no government imposed regulations
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A Good
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Something that can meet the wants and needs of a consumer (e.g. education)
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Cost Benefit Analysis (CBA)
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The cost/ benefits associated with a policy. The aim is to make the policy Pareto (the total benefits should be greater than the costs.
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Economic agent
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Actor/ decision maker
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Elasticity of demand
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How responsive is demand to a change in price
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Equilibrium
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Occurs in a free market where both consumers and suppliers reach an agreed price-neither has an incentive to change their behaviour (quantity demand=quantity supplied).
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Macroeconomics
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The study of the entire economy. What determines policy, unemployment, inflation etc
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Microeconomics
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The study of individual economic agents (at the level of the individual, firm or market)
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Non-excludable
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Consumption by one agent does not prevent another agent from consuming. (air, sun light etc)
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Non-rival
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Consumption by one agent does not decrease the amount of the good other agents can consume.
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Normative Economics
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How the economy should work (v. subjective, the value of something depends on value judgements
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Pareto Efficient Allocation
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An allocation we cannot improve on; we cannot improve the welfare of an individual without decreasing the welfare of some other individual (Doesn’t necessarily mean sharing the pie equally)
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Positive Economics
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Explaining how the economy works
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The Law of Demand
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As prices increase, the quantity demanded decreases
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The Market
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A collection of buyers and sellers that, through their actual or potential actions, determine a price of a product or a set of products
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The non-use values of the environment
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The existence value (the value from knowing the good is there even if we never use it (e.g. the panda)). The bequest value (the value from having the opportunity to leave the environmental resource for future generations)
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Total Economic Value
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The sum of all values derived form the environmental good
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Tragedy of the Commons
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Common property is over exploited by individuals willing to maximise their own benefit at the cost of others. Non-excludable but rival.
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Use Values of the environment
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The current use, option use (save for future use) direct use (e.g fish) or indirect value (ecosystem services)
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Utility
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The benefit a entity receives from consuming a good
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Value
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Not equal to cost. It is the opportunity cost (all the goods one is willing to sacrifice in order to consume 1 unit of a given good)
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