Flashcards
Microeconomic Definitions U1
Cards in this deck (53)
- 1ScarcityWhen there are insufficient resources to provide for everyone’s wants.
- 2Opportunity CostThe next best alternative foregone.
- 3A renewable sourceOne whose stock level can be maintained over a period of time.
- 4A non-renewable sourceOne whose stock level is decreased over time as it is consumed.
- 5PPFShows the maximum potential level of output an economy can produce for two goods or services, given all its current resources/technology.
- 6Factors of productionAre inputs used in production of goods and services.
- 7SpecialisationWhen an individual/firm/country concentrates on the production of a limited range of goods and services.
- 8Division of labourA form of specialisation where individuals concentrate on the production of a particular good or service.
- 9Free market economyAll resources are allocated by the price mechanism. No government intervention.
- 10Mixed economySome resources are allocated by the price mechanism, and some by the government.
- 11A positive statementAre concerned with facts, there is a scientific approach, and can be tested true or false.
- 12A normative statementBased on value judgement, there is no scientific approach.
- 13MarketWhere buyers and sellers come in contact for the purpose of exchange.
- 14DemandThe quantity of a good or service purchased at a given price over a given time period.
- 15PEDPercentage change in quantity demanded/
Percentage change in price - 16Total RevenueThe total revenue a firm receives from selling a given quantity of goods or services.
- 17XEDPercentage change in demand for good B/
Percentage change in price for good A - 18Substitute goodsGoods which are in competitive demand.
- 19Complimentary goodsGoods which are in joint demand.
- 20YEDPercentage change in quantity demanded/
Percentage change in real income - 21Normal goodsA good where a rise in income causes a rise in demand.
- 22Inferior goodsA good where a rise in income causes a fall in demand.
- 23SupplyThe quantity of a good or service that firms are willing to sell at a given price over a given time.
- 24PESPercentage change in quantity supplied/
Percentage change in price of a good - 25EquilibriumWhen there is balance in a market, quantity demanded = quantity supplied.
- 26Consumer surplusThe extra amount of money consumers are prepared to pay for a good or service about what they actually pay.
- 27Producer surplusThe extra amount of money paid to producers above what they are willing to accept for a good or service.
- 28Price mechanismThe way price responds to changes in demand or supply for a product or factor input so that a new equilibrium position is reached in a market.
- 29A direct taxIs a tax levied directly on an individual or organisation, e.g. income tax, corporation tax.
- 30An indirect taxIs a tax levied on the purchase on good or services, e.g. VAT.
- 31SubsidyA grant (provided by the government) to encourage suppliers to increase production of a good or service, leading to a fall in price.
- 32Derived demandDemand which is derived from the demand for the goods or services it makes.
- 33National Minimum WageThe legal minimum hourly rate of pay an employer can pay its workers.
- 34Market FailureWhen the price mechanism causes an inefficient allocation of resources, the forces of demand and supply causes a net welfare loss.
- 35ExternalitiesThe costs or benefits which are external to an exchange.
- 36Private costsCosts which are internal to the firm/individual.
- 37Social costsPrivate costs + external costs
- 38External costsA negative third party effect.
- 39External benefitsA positive third party effect.
- 40Private benefitsBenefits which are internal to the firm/individual.
- 41Social benefitsPrivate benefits + social benefits
- 42Triangle of welfare lossThe excess of social costs over social benefits.
- 43Triangle of welfare gainThe excess of social benefits over social costs.
- 44Public goodsGoods which are non-rival, and non-excludable.
- 45Non-rivalAs more people consume a good and enjoy its benefits, it does not reduce the amount available to others.
- 46Non-excludabilityOnce a good has been produced for the benefit of one person, it is impossible to stop others from benefitting. Characteristic of the free-rider problem.
- 47Mobility of labourThe ability of workers to change from one job to another.
- 48Geographical immobilityThe obstacles which prevent labour from moving from one area to another to find work.
- 49Occupational immobilityThe obstacles which prevent labour from changing their type of occupation to find work.
- 50CommoditiesRaw materials used in the production of goods.
- 51Emission Trading SystemAn attempt to limit greenhouse gas emissions from heavy industry.
- 52Buffer stock schemesAttempts to reduce price fluctuations of a commodity and stabilise producer incomes.
- 53Government failureOccurs when government intervention leads to a net welfare loss/ where the government causes a misallocation of resources in a market.
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- Description
- All the definitions from the Edexcel Student Unit Guide.
- Created by
- tyrasirandula · Mar 2014
- Updated
- Dec 22, 2016
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