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35 Cards in this Set
- Front
- Back
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Normative statement |
Statement that contains a value judgment and cannot be tested |
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Positive statement |
Statement that is testable |
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Ceteris paribus |
All other things being equal |
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Scarcity |
A situation that arises when people have unlimited wants in the face of limited resources |
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Opportunity cost |
The value of the next best alternative forgone |
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Renewable resources |
Stock level can be replenished naturally over time |
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Non renewable resources |
Stock level decreases over time as it is consumed |
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PPF |
Shows different combinations of goods and services that can be produced with given amounts of resources using all resources efficiently |
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Trade off |
Is when you have to choose between conflicting objectives because you can't achieve all your objectives at the same time |
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Specialisation |
When an individual firm country concentrates on production of a narrow range of goods and services |
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Rational decision making |
Where consumers allocate their expenditure on goods and services to maximise utility |
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Price elasticity of demand |
A measure of responsiveness of the demand of a good to change in its own price |
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Calculate PED |
% change in quantity demanded/ % change in p |
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Income elasticity of demand |
Measure the responsiveness of demand as there's a change in real income |
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Calculate YED |
% change in d/ % change in income |
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Cross price elasticity of demand |
Measure of responsiveness of demand for good x following a change in price of good y |
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Price elasticity of supply |
Measure of the responsiveness of quantity supplied to a change in its price |
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Calculate PES |
% change in quantity supplied / % change in price |
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Market failure |
Occurs when the price mechanism caused an inefficient allocation of resources and so leads to a net welfare loss |
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Externality |
A by product of a production process but affects a third party externally |
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Externality |
A by product of a production process but affects a third party externally |
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External costs |
Negative effects on third parties outside of economic transaction |
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Private costs |
Costs internal to a market transaction where are therefore taken into account by the price mechanism |
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Social costs |
Sum of external costs and private costs from a market transaction |
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Non rivalry |
Consumption of good by one person doesn’t prevent another person from also consuming that product |
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Non excludability |
Once provided no one can be excluded from benefitting equally |
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Direct tax |
Levied directly on an individual eg income / corporation tax |
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Indirect tax |
Levied on the purchase of goods and services |
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Government failure |
Government intervened to correct a market failure but results in a more inefficient allocation of resources |
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Consumer surplus |
Difference between the price a consumer is willing to pay and the market price |
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Producer surplus |
Difference between the price a firm is willing to sell at and the market price |
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Substitutes |
A pair of goods which are consisted to be alternatives to each other by consumers I.e a positive XED |
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Complements |
A pair of goods that are consumed together I.e negative XED |
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Buffer stock scheme |
Scheme that buys surplus goods in periods of abundance and sells stock in periods of shortage in order to stabilise the market price |
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Veblen/ snob effect |
demand rises as price rises because people feel its higher price reflects greater status. |
