9931446
Description
Flashcards by katie court, updated more than 1 year ago
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Created by katie court
over 6 years ago
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| Question | Answer |
| budget line | a subset of the feasible set |
| opportunity cost | the best next alternative foregone |
| axioms | completeness transitive rational choice non satiation continuous convex |
| marginal rate of substitution | the gradient of the indifference curve |
| mrs of b for a | change in qty b/ change in qty a |
| substitution effect | a price increase causes demand to fall negative relationship! always substitute to a relatively cheaper good |
| income effect | when price increases real income falls. if the fall causes demand to fall then the IE is positive if the fall causes demand to increase then the IE is negative |
| the role of markets | to allocate resources and coordinate buyers and sellers |
| exogenous variables in supply and demand | tastes and preferences |
| endogenous variables in supply and demand | price and quantity |
| production | turning an input into an output |
| production function | maximum output with available inputs |
| average physical product of labour | total physical product / total labour input |
| marginal physical product | the addition to total output by adding one more unit of input with all other inputs fixed |
| total product curves | represents the total amount of output that a firm can produce with a given amount of labour |
| isocost | a line which shows all of the unit combinations that cost a given amount |
| profit | total revenue - total cost |
| avg revenue | total revenue / quantity |
| if the avg cost is falling marginal cost is below it | if the avg cost is rising, marginal cost is above it |
| economic efficiency | no technical or x inefficiency |
| production possibility frontier | all points on the PPF are production efficient movement along the PPF is caused by a shift in output mix |
| endowment point | initial allocation of goods given and produced |
| the contact curve | the set of allocations of commodities to traders such that no reallocation can make everyone better off |
| pareto optimality | a state where there is no other feasible set where at least one person would be better off and no one would be worse off |
| issues of pareto optimality | non satiation getting happy from doing bad poor judgement (kids, elderly) speciesm (exploiting animals) distributive justice defence of status quo |
| internal costs | costs that are covered by the firm |
| external costs | costs that aren't covered by the firm |
| injections to the circular flow of income | exports investment |
| leakages to the circular flow of income | imports savings |
| GDP | the value of the level of economic activity in an economy in a given year |
| nominal GDP | measures the current value of output |
| real GDP | measures the amount of output valued at constant prices |
| the GDP deflator | nominal GDP / real GDP |
| GNP | the total income of nationals earned domestically and abroad |
| net national product | GDP - depreciation |
| genuine progress indicator | accounts for the value of social human and natural capital as well as normal indicators of progression |
| says law | a person gets paid for production and then uses this income to spend on other products |
| the business cycle | peak / boom recession / contraction trough / recession expansion |
| capacity | the economy's ability to produce goods and services |
| crowding in | an increase in investment leads to and increase in expenditure and income |
| fiscal policy | the use of expenditure and taxes to control the economy |
| expansionary fiscal policy | increase gvt expenditure reduce taxation |
| commodity money | intrinsic value, gold silver |
| flat money | no intrinsic value, coins |
| m0 | notes and coins |
| m1 | current account in commercial banks + m0 |
| m2 | deposit account + m1 |
| m3 | repurchase agreements, money, market shares and paper + m2 |
| m4 | private sector holdings, sterling, deposits + m3 |
| demands | transactionary demand: day to day precautionary demand: rainy day speculative demand: for an opportunity |
| monetary policy | the changing of interest rates to influence aggregate demand |
| phillips curve | shows the negative relationship between employment and inflation |
| NAIRU | non accelerating inflation rate of unemployment: the unemployment rate at which inflation doesn't change over time |
| long run phillips curve | shows relationship between employment and inflation after expectations of inflation have been adjusted |
| mark up | p = (m)c c is average cost |
| balance of payments on financial account | difference between sale of assets to foreigners and purchase of assets in a time period |
| balance of payments on current account | includes b of p on goods and services with balances on factor income and transfers |
| net flow from private sectir | balance between investment and savings |
| net flow for the government | difference between expenditure and tax |
| net flow for overseas sector | the difference between exports and imports and the net income of factor services exported abroad |
| if e < 1 | inelastic: p increases d falls but less than the increase in price |
| if e > 1 | elastic: p increases d falls but more than the increase in price |
| investment | taken at present cost with hope of benefitting in future |
| indicators of economic activity | long leading: contract permits shorter leading: consumer surveys |
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