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