Economics Micro

Front 1

Central purpose of economic activity

Back 1

To purchase goods and services to meet needs and wants.

Front 2

Economic welfare

Back 2

Benefit or satisfaction an induvidual or society gets from allocation of recoureces.

Front 3

Economic problem

Back 3

Scarce resources and unlimited wants lead to decisions being made.

Front 4

Opportunity cost

Back 4

The next best alternative forgone when an economic decision is made.

Front 5

Economic good

Back 5

Scarce goods with an opportunity cost.

Front 6

Free good

Back 6

Goods with no opportunity cost.

Front 7

Capital

Back 7

Manmade goods used to produce other goods e.g Tractors

Front 8

Enterprise

Back 8

Risk takers who bring factors of production together.

Front 9

Land

Back 9

Minerals, land itself, resources taken from the world.

Front 10

Labour

Back 10

Human input into production.

Front 11

Direct taxes

Back 11

Tax on income e.g income tax.

Front 12

Indirect tax

Back 12

Tax on spending e.g VAT

Front 13

PPF

Back 13

Indicates maximum possible output that can be achieved.

Given fixed set of resources

Given fixed technology

In a given time period

Front 14

Productive efficient

Back 14

Firm opperating at minimal total cost with maximum total output from inputs.

Any point on the PPF.

Front 15

Allocative efficient

Back 15

Cannot produce more of one good without producing less of another.

Front 16

Labour productivity

Back 16

Output per worker per period of time.

Front 17

Division of labour

Back 17

Breaking production down to a sequence of tasks.

Each worker assigned to a particular task

Front 18

Specialisation

Back 18

When we concentrate on a product or task.

Front 19

Positive statements

Back 19

Statement that can tested against real-world data.

Front 20

Normative statements

Back 20

Statements that require value judgements to be made.

Front 21

Value judgements

Back 21

Statements that are not testifiable.

Front 22

Demand

Back 22

Amount consumers are willing and able to buy at each given price.

Front 23

Effective demand

Back 23

Demand supported by ability to pay for a good or service.

Front 24

Complementary products

Back 24

Goods consumed together.

Front 25

Substitutes

Back 25

Competing goods that can be used as alternatives.

Front 26

Composite demand

Back 26

When a good is demanded for more than one purpose.

>demand for one purpose <supply for another purpose increasing prices.

E.g metal for cars and infrastructure

Front 27

Derived demand

Back 27

The demand for one good or service comes from the demand of another good or service.

E.g flights and pilots

Front 28

Normal good

Back 28

The demand for the good increases as income rise.

E.g sports cars

Front 29

Inferior goods

Back 29

Demand for a good increases as incomes decrease

E.g bus travel

Front 30

Supply

Back 30

Amount offered for sale at each given price.

Front 31

Joint supply

Back 31

Production of one good results in production of another.

E.g beef and leather.

Front 32

Equilibrium

Back 32

Price at which demand equals supply.

Front 33

Market clearing price

Back 33

Price at which all goods supplied are demanded.

Front 34

PED

Back 34

Responsiveness of demand to a change in price.

%changeQD÷%changeP

Front 35

Subsidies

Back 35

Payments by government to producers to incourage production of goods and services.

Front 36

YED

Back 36

Responsiveness of demand to a change in income.

%changeQD÷%changeIncome

Front 37

Cross PED

Back 37

Effect of change in price of good A on demand for good B.

%changeQDforgoodB÷%changePGoodA

Front 38

PES

Back 38

Responsiveness of supplr to a change in price.

%changeQS÷%changeP

Front 39

Sustainable

Back 39

Activity carried out today that doesn't stop future generations maximising welfare.

Front 40

Total costs

Back 40

Fixed costs + Variable costs

Front 41

Average total costs

Back 41

Total cost ÷ No. Units of output

Front 42

Fixed cost

Back 42

Cost of production that does not vary as output changes.

Front 43

Variable costs

Back 43

Costs of production vary with output.

Front 44

Economies of scale

Back 44

Occurs as output increases and average costs per unit falls.

Front 45

Short run

Back 45

Time period in which at least one factor of production is fixed.

Front 46

Long run

Back 46

Time period where all factors of production are variable and so allows a business to increase their scale of production.

Front 47

Diseconomies of scale

Back 47

Occurs as output increases and average cost per unit rise.

Front 48

Market failure

Back 48

Occurs when the price mechanism fails to allocate scarce resources efficiently

Front 49

Public goods

Back 49

Are not provided by the free market as they are non-excludable and non rivalry.

Front 50

Non-excludable

Back 50

Where it is not possible to provide a good or service to one person without it therby being available for others to enjoy.

Front 51

Non-rivalry

Back 51

Where the consumption of a good or service by one person will not prevent others from enjoying it.

Front 52

Free rider principal

Back 52

Not possible to charge an induvidual for a good or service that someone else can then get free.

Front 53

Quasi public good

Back 53

These are goods or services that have some features of both public and private goods.

Front 54

Externalities

Back 54

Benefits/costs to a third party as a result of the consumption or production of a good or service.

Front 55

Private costs

Back 55

Cost to a consumer or producer of an economic transaction.

Front 56

Social costs

Back 56

Private + external costs

Front 57

Government failure

Back 57

When the governmets intervenes to correcr market failure and ends up worsening it or creating a new market failure.

Front 58

Pure monopoly

Back 58

When a firm has 100% of the market share.

Front 59

Legal monopoly

Back 59

When a firm has more than 25% of the market share.

Front 60

Inequality

Back 60

Large differences in income and wealth between different groups within our economy leads to a wide gap in living standrads.

Front 61

Information failure

Back 61

When economic agents do not preceive benefits/cost of transaction.

Front 62

Consumer surplus

Back 62

The difference between the price consumers are willing to pay and the price they actually pay.

Front 63

Producer surplus

Back 63

The difference between the price recieve and the price of which they are prepared to supply.

Front 64

Assymetric information

Back 64

Occurs when somebody knows more than somebody else in the market. This can make it difficult for two people to do business together.

Front 65

Dynamic efficiency

Back 65

When a business carries out research and development into new products or new productive processes.

Front 66

Merit goods

Back 66

Goods/services that have positive externalitites in consumption but are underconsumed if left to the free market, resulting in market failure.

Front 67

Demerit goods

Back 67

Goods/services that have negative externalities in consumption but are over consumed if left to the free market, resulting in market failure.