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47 Cards in this Set
- Front
- Back
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Production |
A process or set of processes that converts inputs into output of goods |
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Capital |
A good which is used in the production of other goods and services |
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Consumer good |
A good which is consumed by individuals or households to satisfy their needs or wants |
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Finite vs renewable resources |
Scarce vs not |
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Fundamental economic problem |
How best to allocate scarce resources to improve and maximise human happiness and welfare |
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Scarcity |
Unlimited wants and limited resources |
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Opportunity cost |
The cost of giving up the next best alternative |
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Production possibility frontier |
Curve depicting combinations of two products that can be produced when all available resources are fully and efficiently employed |
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Economic growth |
Increase in the potential level of real output the economy can produce over a period of time |
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Full employment |
When all who are able and willing to work are employed |
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Unemployed |
When not all those who are able and willing to work are employed |
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Productive efficiency |
Impossible to produce more of one good without producing less of another. AMC lowest point |
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Allocative efficiency |
Economic resources used to produce goods and services that best match peoples tastes and preferences |
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Supply |
The quantity of a good or service that firms are willing and able to sell at a given price in a given time period |
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Demand |
The quantity of a good or service that consumers are willing and able to buy at a given price in a given time period (effective) |
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Price/ income/ cross elasticity of demand |
The extent to which the demand for a good changes in response to a change in price/ income/ another good |
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Price elasticity of supply |
The extent to which the supply of a good changes in response to a change in the price |
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Joint supply |
When one good is produced, another is produced from the same raw material |
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Competing supply |
Raw materials used to produce one good they cannot be used to produce another good |
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Complementary good |
Joint demand or a good demanded at the same time |
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Substitute good |
Competing demand, that can be used instead |
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Composite demand |
Demand for a good with more than one use |
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Dervived |
Demand for a good which Is an input into the production of another good |
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Productivity ; labour/capital |
Output per unit of input (capital/worker) |
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Specialisation |
Worker performs one task or narrow range |
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Division of labour |
Different workers perform different tasks when producing a good or service |
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Average cost |
Total cost of production divided by output |
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Economy of scale (diseconomies) |
As output increases, ling run average cost falls (rises) |
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Price taker vs Maker |
A firm passively accepts the ruling market conditions vs firm possessing power to set price within market |
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Concentrated market |
Contains free firms, in extreme one (pure monopoly) |
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Monopoly power |
The power of a firm to act as a price maker rather than a price taker |
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Natural monopoly |
When there is only room in a market for one firm benefiting from economies of scale to the full |
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Oligopoly |
A market dominated by a few firms |
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Collusion |
Cooperation between firms. Fix prices |
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Invention vs innovation |
Creating new ideas for products or processes vs using inventions into marketable products or services |
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Private good |
Excludable and/or rival |
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Public good |
Non-excludable and non-trivial |
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Quasi public good |
Not fully non rival and or possible to exclude people from consumption |
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Externality |
The external benefit or cost that is dumped on third parties outside the market |
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Merit good |
Social benefits of consumption exceed private benefits |
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Demerit good |
Social cost of consumption exceeds private costs |
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Subsidy |
Payment made by govt to producer for each unit of subsidised good they produce. Also consumers |
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Information problem |
People make wrong decisions because they dont possess or ignore relevant info. Myopic short sighted |
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Tax |
A compulsory levy imposed by the govt to pay for its activities or achieve objects, reduce consumption of demerit good |
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Price ceiling |
A price above which it is illegal to trade. Maximum legal prices can distort market creating excess supply |
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Price floor |
A price below which is illegal to trade. Minimum legal prices can distort markets creating excess supply |
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Government failure |
Govt intervention reduces economic welfare leading to an allocation of resources worst than the free market outcome |
