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60 Cards in this Set
- Front
- Back
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Internal economies of scale |
Managerial Risk bearing Financial Bulk buying (purchasing) Technical |
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Strategic barriers |
Marketing Limit pricing Restrictive practices |
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Legal barriers |
Patents and licenses innicent barrier |
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Innocent barriers |
Capital costs Sunk costs Economies of scale Cost advantage |
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External diseconomies of scale |
If the government imposes a tax on the firm. This causes the LRAC curve to shift upwards. |
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External economies of scale |
Labour Ancillary and commercial services Co-operation |
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Barriers to entry/exit |
Innocent Strategic Legal |
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Internal diseconomies of scale |
Control Communication Coordination |
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Super moral profit (SNP) |
Revenue > costs |
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Profit maximisation / loss minimising |
MC = MR |
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Dynamic efficiency (sustainability) |
Sustainability in the long run. |
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Perfect competition characteristics |
Price takers Many buyers and sellers Homogenous product No barriers Perfect knowledge |
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Concentration ratio |
Expresses the market share of a given number of firms.
*exclude other |
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X-inefficiency |
Low levels of competition reduces incentives to innovate which decrease efficiency. |
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Market share |
The percentage of all sales within a market that are held by one firm. |
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Allocative efficiency (marginal cost pricing) |
MC = AR This is when firms are maximising consumer welfare by allocating resources to what consumers want. |
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Business objectives |
Profit max Sales max Rev max Profit satisfying |
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Productive efficiency |
MC=AC Producing at the lowest possible costs. |
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PED Formula |
Percentage change in quantity demanded/ percentage change in price |
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Determinants of PED |
SNAP Substitutes Necessities or luxury Addictive nature Proportion of income |
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PES formula |
Percentage change in quantity supplied/ percentage change in price |
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YED formula |
Percentage change of quantity demanded / percentage change in income |
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XED formula |
Percentage change in quantity demanded of good X / percentage change in price of good Y |
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Types of market failure |
Negative externalities Asymmetric information Public goods Demerit goods Maximum prices |
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Market failure in labour markets |
Geographical immobility Occupational immobility |
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Market failure in financial markets |
Asymmetric information Moral hazard Negative externalities Speculation collusion |
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PED for labour markets |
Proportion of total costs that are labour cost. Substitutes. Elasticity of product. Time. |
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PES for labour markets |
Spare capacity Time Availability of stock |
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Scarcity |
A situation that arises when people have unlimited wants in the face of limited resources |
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Revenue max |
MR=0 |
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Specialisation |
When we concentrate on a particular product or task. Surplus products can then be exchanged and traded with the potential for gains in welfare. |
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Revenue max |
MR=0 |
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Specialisation |
When we concentrate on a particular product or task. Surplus products can then be exchanged and traded with the potential for gains in welfare. |
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Rational decisions |
Economic agents are able to rank the order of different outputs from an action in terms of their net benefits to them. |
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Opportunity cost |
The cost of the next best alternative foregon. |
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Factors of production |
Resources used in the production process including land, labour, enterprise and capital. |
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Production possibility frontier |
Used to explain the basic economic problem and show opportunity cost. It shows the maximum output potential for an economy when all resources are fully and efficiently employed. |
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Division of labour |
A process whereby the production procedure is broken down into a sequence of stages, and workers are assigned to a particular stage. |
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Production possibility frontier |
Used to explain the basic economic problem and show opportunity cost. It shows the maximum output potential for an economy when all resources are fully and efficiently employed. |
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Division of labour |
A process whereby the production procedure is broken down into a sequence of stages, and workers are assigned to a particular stage. |
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Market economy |
Resources are allocated by the operating of market forces of demand and supply working through price mechanisms. |
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Command economy |
Resources are allocated by the state. |
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Mixed economy |
An economy where both the free market mechanisms and the government planning process allocate a significant proportion of resources. |
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Marginal utility |
The change in the satisfaction from consuming an extra unit. |
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Diminishing marginal utility |
Describes the situation where an individual gains less additional utility from consuming a product, the more of it is consumed. |
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Normal good |
One where the quantity demanded increases in response to an increase in consumer income. |
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Inferior good |
One where the quantity demanded decreases in response to an increase in the consumer income. |
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Substitutes |
Two good are substitutes if the demand for one good is likely to rise if the price of the other good rises. |
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Inferior good |
One where the quantity demanded decreases in response to an increase in the consumer income. |
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Substitutes |
Two good are substitutes if the demand for one good is likely to rise if the price of the other good rises. |
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Complements |
Two goods are complements of an increase in the price of one good causes the demand for the other good to fall. |
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Inferior good |
One where the quantity demanded decreases in response to an increase in the consumer income. |
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Substitutes |
Two good are substitutes if the demand for one good is likely to rise if the price of the other good rises. |
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Complements |
Two goods are complements of an increase in the price of one good causes the demand for the other good to fall. |
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Positive statements |
They can be tested. These are statements that can be proven or disproven by examining the facts. They deal with scientific explanations of the economy. |
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Inferior good |
One where the quantity demanded decreases in response to an increase in the consumer income. |
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Substitutes |
Two good are substitutes if the demand for one good is likely to rise if the price of the other good rises. |
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Complements |
Two goods are complements of an increase in the price of one good causes the demand for the other good to fall. |
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Positive statements |
They can be tested. These are statements that can be proven or disproven by examining the facts. They deal with scientific explanations of the economy. |
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Normative statements |
They contain valued-judgements. They are subjective, meaning they are based on an individuals opinion. They can not be proven or disproven. |
