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99 Cards in this Set

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Commodity

A good, usually referee to as raw goods or semi-manufactured goods, unbranded and indistinguishable from each other

Competetion

A market situation in which there are a large number of buyers

Complementary goods

Goods that are consumed together like DVD's and DVD players

Complete market failure

Where the market fails to provide a product at all

Composite demand

A good that is demanded for more than one purpose so that demand for one product reduces supply for the other purpose

Contraction in supply

When the amount offered for sale is reduced because the price has fallen

Contractions in demand

Falls in the quantity demanded of a good caused by an increase in price

Demand

The amount that consumers are willing and able to buy at each price level

Demerit good

A good that would be over-consumed in a free market, brings less overall benefit to consumers than they realise

Deregulation

The process of removing government controls from market

Derived demand

When the demand for one good or service comes from the demand from another good or service, demand for cars stimulates the demand for steel

Discoraged workers

Workers who leave the labour market because despite numerous attempts they are unable to find a job

Diseconomies of scale

Where an incense in the scale of production lease to an increase in average total costs for firms

Disequlibrium

A situation within the market where supply does not equal demand

Division of labour

Breaking the production process down into a sequence with workers assigned to particular tasks

Economic goods

Goods that are scarce and therfore have an opportunity cost

Economies of scale

Where an increase in the scale of production leads to reductions in average total costs for firms

Effective demand

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

Equilibrium

The price at which demand is equal to supply and there is no tenancy for change

Excess demand

When demand is greater than supply at a given price

Excess supply

When supply at a particular price is greater than demand this should signal to producers to lower prices

Extension in supply

When there is an increase in supply because the market price has risen

Extensions in demand

Increases in demand caused by changes (falls) in price

Externalities

Costs of benefits that spill over to third parties external to a market transaction

Factor market

The market for the factors of production that make other goods and services

Failure of information

Where economic agents do not properly percieve the benefits or disadvantages of a transaction

Fixed costs

Costs of production that do not vary as output changes

Free goods

Goods that have no opportunity cost in supply

Free-rider problem

Where some consumers benefit from other consumers purchasing a good, particularly in the case of public goods

Geographial immobility

Where workers find it difficult to move to where employment opportunities may be, due to family ties and differences in housing costs

Goods and services

Goods are considered to tangible products that are physical where as services are not tangible

Government failure

When government intervention to correct market failure does not improve the allocation of resources or leads to a worsening of the situation.

Human capital

The skills, abilities, motivation and knowledge of labour. Shift the PPF to the right.

Incidenice of tax

Proportion of tax that is passed onto the consumer, when demand is price inelastic the incidence of tax tends to be high.

Income

A flow of earnings to a factor of production over a period of time. Eg, wages or salaries.

Income elasticity of demand

The proportion to which demand is effected by a chance in incomes.


% change in incomes ÷ % change in demand

Indirect tax

A tax that doesn't directly effect spending.

Inferior good

Goods or services that have lower demand when incomes are higher. Negative income elasticity of demand.

Investment good

A good that increases in value after a period of time

Invisibles

Intangibles such as the provision of insurance and banking services.

Joint supply

When the production of one good also results in the production of another. Eg cows provide milk beef and leather

Marginal external benefit

The spillover benefit to third partys of an economic transaction

Marginal external cost

The spillover cost to third parties of an economic transaction

Marginal probate benefit

The benefit to an individual or firm of an economic transaction

Marginal private cost

The cost to an individual or firm as a result of an economist transaction

Marginal social benefit

The full benefit to society of an economic transaction, MEB+MPB

Marginal social cost

The full cost to society of an economic transaction, MEC+MPC

Market clearing price

The price at which all goods that are supplied will be demanded

Market demand

Total demand in a market for a good, the sum of all individuals' demand, at each given price.

Market failure

Where the market fails to produce what consumers require at the lowest possible cost

Market mechanism

The interaction of the forces of supply and demand, leading to an equlibrium price and quantity of a product.

Market supply

the sum of all individuals' supply curve at each given price

maximum price

a price ceiling above which the price of a good or service is not allowed to increase, must be below the equlibrium to work.

merit good

a good that would be under-consumed in a free market, as individuals do not fully perceive the benefits obtained from consumption.

Minimum price

a price floor below which the price of a good or service cannot decrease, must be above equlibrium to have any effect.

monopoly

a market structure dominated by a single seller of a good.

negative externatities

costs imposed on a third party not involved with the consumption or production of a good.

normal goods

goods or services that will see an increase in demand as incomes rise

occupational immobility

when workers may find it difficult to secure new jobs simply because the lack the requires skills and training

opportunity cost

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

partial market failure

where the free market provides a product but with a misallocation of resources

planned supply

the amount producers plan to produce at each given price

pollution permit

a permit sold to firms by the government, allowing them to pollute up to a certain limit

positive externality

a positive spillover effect to third parties of a market transaction

price elasticity of demand

the responsiveness of demand according to changes in the price level. % change in quantity demanded divided by % change in price

private good

a good that is exclude and rival in consumption

product markets

markets in which all kinds of goods and services are traded.

production

the process that converts factor inputs to outputs of goods and services

productive efficiency

when a firm operates at minimum average total cost, producing the maximum possible outputs from inputs into the production process.

productivity

the measure of efficiency, measuring the ratio of inputs to outputs, the most common measure is labor productivity, which is the output per worker per time period (often per hour)

profit

when total income or revenue for a firm is greater than total costs

public good

a good which posesses the characteristics of being non-excludable and non-rivalry in consumption

renewable goods

goods that are able to be replenished over time unlike oil, gas and coal resources

specialisation

the production of a limited range of goods by an individual factor of production or firm or country, in cooperation of others so that together a complete set of goods is provided

stock

a quantity measured at a particular point in time

subsidies

payments by government to producers to encourage production of a good or service. often associated with farmers and help to reduce prices paid by consumers and outputs are higher.

substitutes

goods that will be used as an alternative to another good, for example mars and snickers, train and bus. These goods have a positive cross price elasticity of demand.

supply

the amount offered for sale at each given price.

total factor productivity

the overall productivity of inputs used by a firm in producing a particular level of output

trade union

an organisation of workers set up to negotiate on wages, working hours and working conditions with employers on behalf of its workers

variable costs

costs of production that may vary with output

visibles

exports or imports that are tangible and that you can see and touch as it crosses international boundaries

wealth

a stock of owned assets eg, housing property, savings and shares

weighting

where a commodity is given a weighting proportional to its importance in the general pattern of consumer spending

perfectly inelastic

where an elasticity measure is 0. Where output is not at at all effected by prices. Shown by a vertical curve

perfectly elastic

where an elasticity measure is infinity, where a change in price results in the god no longer being demanded at all. shown by a horizontal curve

Market clearing price

The price at which all goods that are supplied will be demanded.

Market demand

Total demand in a market for a good, the sum of each individuals demand at each given price.

Market failure

Where the market fails to produce what consumers require at the lowest possible cost

Market mechanism

The interaction of the forces of supply and demand, leading to an equilibrium price and quantity for a product

Market supply

The sum of all individual firm's supply curves at each given price

Maximum price

A price ceiling above which the price of a good or service is not allowed to increase. Must be below equlibrium to have an effect.

Merit good

A good that would be under-consumed in a free-market as individuals do not fully percieve the benefits obtained from consumption

Minimum price

A price floor below which a good or service is not allowed to increase, to have any effect it must be above equlibrium

Monopoly

A market structure dominated by a single provider of a good

Negative externalities

Costs imposed onto third parties not involves In the production or consumption of a good.

Normal goods

Goods or services that wI'll see an increase in demand when incomes rise. Have a positive income elasticity of demand

Opportunity cost

The next best alternative forgone when an economic decision is made

Partial market failure

When a market provides a product but with a misalocation or resources