51367
Description
Flashcards by Azra Kucukkaramu, updated more than 1 year ago
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Created by Azra Kucukkaramu
about 11 years ago
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| Question | Answer |
| Economics | A science that studies how to allocate scarce resources, to satisfy societies unlimited needs and wants. |
| Microeconomics | Smaller scale allocation of scarce resources (personal = consumers and workers, firms = producers). |
| Household | The number of people who live in a house, and their economic activity. |
| Goods | Physical trade, tangible. |
| Services | Invisible trade, intangible. |
| Economic problem | Limited, scarce resources, but unlimited human needs and wants. |
| Scarcity | Scarce resources, not enough for everyone. |
| Factors of production | Scarce resources, carrying an opportunity cost (Land, labour, capital and enterprise). |
| Factor rewards/ Factor income | Owners of factors of production are rewarded when they decide to trade their factors. |
| Land | All natural resources (land, rivers, forests etc.) Reward for landlords is rent. |
| Labour | Physical and intellectual input from workers. Reward for workers is wage. |
| Capital | All man-made tools and equipment (not money). Reward for creditors is interest. |
| Enterprise | Risk taking factor, expertise and know-how. Reward for individuals is profit. |
| Entrepreneur | An individual, who builds capital through general enterprise skills. |
| Want | Non essential items, personal need which is subject to change. |
| Need/ basic needs | Necessary/obligatory things and raw materials, needed for survival. |
| Economy/ Economic system | A way to solve the economic problem. |
| Free market economy (Capitalist system) | Government has a limited role; resources are allocated without government interference. There is unrestricted ownership; freedom of choice and free enterprise. |
| Command economy (centrally-planned economy) | Government and bureaucracy decide what, how and for whom to produce. Planners make assumptions about what people want, and set targets and prices based on this. |
| Mixed economy | Mix of free market and centrally planned economy. Tax is taken so the state can ensure a minimum standard of living for all. |
| Opportunity cost | Foregoing the benefit of the next best option. |
| Production Possibility Curve (PPC) | The limits or barrier of productive capacity. Also known as the production possibility frontier (PPF). |
| Trade-off | The process of making a choice between alternatives. |
| Specialisation | When scarce resources are focused upon providing a specific good/service. |
| Division of labour | Breaking down a manufacturing process into specific self-contained tasks, performed by individual workers. Results in significant increases in output; birth of mass production. |
| Exchange | The trade of two goods, of agreed equal value. |
| Productivity | A measure of the efficiency of production. |
| Nationalisation | The transfer of private sector firms to state-ownership. |
| Privatisation | The transfer of state-owned industries to the private sector. Also known as denationalisation. |
| Market | A place of transactions. The exchange of goods and services between producers and consumers, using money as a means of payment. Price is the main determinant. |
| Demand | The quantity of goods or services consumers are willing to buy in a market at a given price, over a period of time. |
| Notional demand | The aggregate quantity of goods and services that are demanded, when markets are in equilibrium. |
| Effective demand | The intention to consume is converted into a purchase of goods or services. |
| Supply | The quantity of goods and services, producers or firms are willing to sell, at a given price. |
| Determinant of demand | The factors that affect demand. |
| Determinant of supply | The factors that affect supply. |
| Demand curve | Demand in relation to price and quantity. |
| Demand schedule | The quantity demanded at every price. |
| Supply curve | Supply in relation to price and quantity. |
| Supply schedule | The quantity supplied at every price. |
| Ceteris paribus | Literally translated ‘All other things being equal’. When all other factors that may affect demand are assumed constant. |
| Equilibrium (market clearing) | A situation where there is a state of balance, and so no tendency for change. |
| Equilibrium price | The price which leaves neither unsold products, nor unsatisfied demand. Demand is equal to supply. |
| Equilibrium quantity | The quantity which leaves neither unsold products, nor unsatisfied demand. Demand = Supply. |
| Glut (excess supply) | Supply exceeds demand, at a given price. Supply > Demand. |
| Shortage (excess demand) | Demand exceeds supply, at a given price. Demand > Supply. |
| Normal good | A product for which an increase in income, leads to an increase in demand for that item. (+ YED value) |
| Inferior good | A product for which an increase in income, leads to a decrease in demand for that item. (- YED value) |
| Substitute good | Alternative products that can be used to satisfy the same given want or need. (+ XED value) |
| Complementary good | Products that consumers use jointly together. (- XED value) |
| Producer surplus | The difference between the market price, and the lowest price consumers are willing to pay. |
| Consumer surplus | The difference between the market price, determined by supply and demand, and the highest price consumers are willing to pay for a good or service. |
| Subsidy | Government financial assistance to producers, to reduce costs of production. A non-price determinant of supply, resulting in increased supply. |
| Indirect tax | Compulsory changes imposed by the government on the sale of goods and services i.e. taxes on spending. |
| Minimum price | Adopted when the government would like to help certain producers secure good profit levels, or consumer adequate income level. |
| Maximum price | Occurs when the government intervenes in a market which is failing to fix the price of a product below the market price. |
| Elasticity of demand | Measures the responsiveness of demand, following a percentage change in any determinant of demand. |
| Elasticity of supply | Measures the responsiveness of supply, following a percentage change in any determinant of supply. |
| Cross Elasticity of Demand (XED) | The responsiveness of demand of good A, following a percentage change in the price of good B. (+) or (–) value. |
| Income Elasticity of Demand (YED) | The responsiveness of demand, following a percentage change in income. (+) or (–) value. |
| Price Elasticity of Demand (PED) | The responsiveness of demand, following a percentage change in price. Always (–) value. |
| Elastic | A change of one variable results in a bigger change of the second. |
| Inelastic | A change of one variable results in a smaller change of the second. |
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