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15 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Allocative efficiency |
The value that consumers place on a good/service equals the cost of the resources used in its production |
Equal value |
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Barriers to entry |
Factors that make it difficult for new firms to enter a market. E.g. Patents and brand loyalty |
New businesses |
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Buffer stocks |
The market price of agricultural products are stabilised, through buying up supplies during a good harvest, then selling them off when supplies are low |
Agriculture |
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Capital Goods |
Machinery or equipment, not useful in themselves but for the goods/services they help to produce in the future |
Producer goods |
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Ceteris paribus |
To simplify analysis, economists isolate the relationship between two variables; assuming that all other influencing factors are held constant |
Constant |
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Cross price elasticity of demand |
Responsiveness of demand for good X following a change in the price of good Y. |
Complementary or a sub? |
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Deadweight loss |
The loss in producer or consumer surplus due to an inefficient level of production |
Market failure or government failure? |
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Diversification |
The reduction of risk achieved by replacing a single risk with a larger number of smaller, unrelated risks |
Reduction of risk |
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Excess demand |
The difference between quantity supplied and the higher quantity demanded, resulting in queuing and increased prices |
Price below equilibrium |
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Hedging |
The process of protecting oneself against risk. E.g. A contract for the purchase of foreign exchange, to protect against future fluctuations |
Protection |
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Intellectual property |
Legal property rights over creations of the mind. E.g. Copyrights, trademarks and patents |
Prevents copying |
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Market failure |
The competitive outcome of markets is not efficient, due to an activity benefiting individuals more than it does society as a whole |
Inefficiency, social benefits |
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Normal goods |
Goods with a positive IED. Necessities between 0 and 1, luxuries >1 |
Positive |
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Public goods |
Non-rival and non-excludable, often provided by the government |
Rival and excludable? |
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Subsidies |
Payments by the government to suppliers that reduce their costs. The effect of this is an increase in supply which leads to a fall in the equilibrium price |
Payments |
