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67 Cards in this Set

  • Front
  • Back
Economics
The study of how to allocate scarce resources in the most effective way
Economic problem
how to allocate scarce resources among alternative uses
Factor of Production
the resource inputs that are available in an economy for the production of goods and services
goods
tangible products
services
intangible products
land
natural resources in an economy
labour
the quantity and quality of human resources
capital
man- made aids to production
entrepreneurship
the willingness of an entrepreneur to take risks and organise production
production
the output of goods and services
scarcity
a situation where there are insufficient resources to meet all wants
opportunity cost
the cost of the nest best alternative forgone
specialisation
the concentration by a worker or workers, firm, region, or whole economy on a narrow range of goods and services
subsidy
a payment by a governing body to encourage the production or consumption of a product
division of labour
the specialisation of labour where the production process is broken down into separate tasks
productivity
output, or production of a good or service, per worker
production possibility curve
this shows the maximum quantities of different combinations of output of two products given current resources and the state of technology
Trade-off
the calculation involved in deciding on whether to give up one good for another
economic growth
change in the productive potential of an economy
economic system
the way in which production is organised in a country or group of countries
market economy
an economic system whereby resources are allocated through the market forces of demand and supply
supply
the quantity of a product that producers are willing and able to provide at different market prices over a period of time
demand
the quantity of a product that consumers are able and willing to purchase at various prices over a period of time
mixed economy
an economic system in which resources are allocated through a mixture of the market and direct public sector involvement
market
where or when buyers and sellers meet to trade or exchange products
ceteris paribus
assuming other variables remain unchanged
demand curve
this shows the relationship between the quantity demanded and the price of a product
consumer surplus
the extra amount that a consumer is willing to pay for a product above the price that is actually paid
disposable income
income after taxes on income have been deducted and state benefits have been added
real disposable income
income after taxes on income have been deducted and state benefits have been added and the result has been adjusted to take into account changes in the price level
normal goods
goods for which an increase in income leads to an increase in demand
inferior goods
good for which an increase leads to a fall in demand
substitutes
competing goods
complements
goods for which there is joint demand
supply curve
this shows the relationship between the quantity supplied and the price of a product
producer surplus
the difference between the price a producer is willing to accept to accept and what it is actually paid
equilibrium price
the price where demand and supply are equal
disequilibrium
any position in the market where demand and supply are not equal
surplus
an excess of supply over demand
elasticity
the extent to which buyers and sellers respond to a change in market conditions
price elasticity of demand
the responsiveness of the quantity demanded to a change in the price of the product
price elastic
where the % change in the quantity demanded is sensitive to a change in price
price inelastic
where the % change in the quantity demanded in insensitive to a change in price
income elasticity of demand
the responsiveness of demand to a change in income
normal goods
goods with a positive income elasticity of demand
income inelastic
goods for which a change in income produces a less that proportionate change in demand
income elastic
goods for which a change in income produces a greater proportionate change in demand
cross elasticity of demand
the responsiveness of demand for one product in relation to a change in the price of another product
price elasticity of supply
the responsiveness of the quantity supplied to a change in the price of the product
efficiency
where the best use of resources is made for the benefit of consumers
allocative efficiency
where consumer satisfaction is maximised
market failure
where the free market mechanism fails to achieve economic efficiency
productive efficiency
where production take place using the least amount of scarce resources
information failure
a lack of information resulting in consumers and producers making decisions that do not maximise welfare
externality
an effect whereby those not directly involved in taking a decision are affected by the actions of others
private costs
the costs incurred by those taking a particular action
private benefits
the benefits directly accruing to those taking a particular action
negative externality
this exists where the social cost of an activity is greater than the private cost
positive externality
this exists where the social benefit of an activity exceeds the private benefit
merit goods
these have more private benefits than their consumers actually realise
demerit goods
their consumption is more harmful than is actually realised
public goods
goods that are collectively consumed and have the characteristics of non-excludability and non- rivalry
non- excludability
situation existing where individual consumers cannot be excluded from consumption
free rider
someone who directly benefits from the consumption of a public good but who does not contribute towards in provision
quasi-public goods
goods having some but not all of the characteristics of a public good
direct tax
one that taxes the income of people and firms that cannot be avoided
indirect tax
a tax on levied on goods and services