Flashcards
MICRO ECONOMICS
Flashcards do conjunto (67)
- 1CAPITAL INTENSIVEUse of a high proportion of capital goods in production, relative to other resources
- 2CONSUMER SOVEREIGNTYBuyers ultimately determine what is produced and how scarce resources are used by means of their purchases
- 3CONTRACTION IN DEMANDA rise in price causes movement along demand curve and a decrease in demand
- 4DERIVED DEMANDOccurs when demand for a particular product results from the demand for another product
- 5CONTRACTION IN SUPPLYA fall in supply causes movement along the suppy curve and a decrease in supply
- 6CROSS ELASTICITY OF DEMANDMeasures resonsiveness of demand for one product to a given change in price of another
- 7EQUILIBriumState of balance - no tendency to change
- 8ECONOMIC EFFICIENCYOccurs when society produces those products consumers most value at the lowest possible unit cost
- 9ECONOMIC SYSTEMMethods used by society to deal with production, distribution and consumption
- 10EFFECTIVE DEMANDThe willingness and ability to purchase a product
- 11EFFICIENCY MAXIMISATIONWhen a firm selects the level of output and price that delivers allocative efficiency by producing where P=MC
- 12BARTERDirect exchange of products for other products - without the use of money
- 13ECONOMIC AGENTSTerm used to describe households and firms
- 14ECONOMIC GOODProducts created using scarce resources
- 15DOUBLE COINCIDENCE OF WANTSIf either party doesn't want the product being offered in BARTER, then no exchange will take place
- 16EQUILIBRIUM PRICEThe PRICE where the amount consumers demand = the amount producers supply
"BALANCED" - 17EQUILIBRIUM OUTPUTAmount traded at the equilibrium market price
i.e. market output - 18DIVISION OF LABOURspecialisation of labour where production is broken down into separate parts
- 19ALLOCATIVE EFFICIENCYwhen resources are being used to produce those items most valued by society, given their costs
- 20COMMODITIESPrimary products such as - gold, oil, wheat
- 21DEMERIT GOODProducts believed to be more harmful to the consumer than they actually realise - overconsumed in free markets
(have negative externalities) - 22DISEQUILIBRIUMA situation where there is a state of imbalance + so no tendency for change
- 23ELASTICITYMeasures the response of one variable to a change in another variable
- 24ALLOCATIVE EFFICIENCY OUTPUTThe level of output where
MSB = MSC
(I.E. socially optimum output level) - 25CETERUS PARIBUS"All other things being equal"
- 26COMMAND ECONOMYEconomic system where states owns and allocates resources
- 27CONSUMER SURPLUSExtra amount a consumer is willing + able to pay for a product above the market asking price
- 28DIRECT TAXESCompulsory charges imposed by the government on income or wealth of individuals and firms
- 29ASYMMETRIC INFORMATIONWhen one party in a transaction knows more than another
- 30MIXED ECONOMYeconomic system where resources are allocated through a mixture of the market with direct public sector involvement
- 31MARKET ECONOMYeconomic system where resources are allocated through market forces of supply and demand
- 32MICRO DEFINITIONthe study of how households and firms make spending decisions in a market
- 33INFERIOR GOODSAn increase in income leads to a fall in demand
(e.g. supermarket own brands) - 34CHANGE IN DEMANDwhere a change in a non-price factor leads to an increase or decrease in demand
- 35FACTORS OF PRODUCTION-Land (resources)
-Labour (labourforce)
-Capital (machinery)
-Enterprise (entrepreneurship) - 36DEMANDWillingness and ability to purchase a product at various prices over a period of time
- 37BENEFITS OF SPECIALISATION-Higher productivity
-Higher quality of goods produced
-Increase in efficiency - 38MARKETA place that brings buyers and sellers together
- 39PRICE SYSTEMmethod of allocating resources by the free movement of prices
- 40INFORMATION FAILURELack of info resulting in consumer spending decisions that do not maximise welfare
(e.g. smoking) - 41ARITHMETIC MEANthe sum of items divided by the number of items
- 42MARKET FAILUREFree market mechanism fails to achieve economic efficiency
- 43EXTERNAL COSTSthe costs that are the consequence of externalities to 3rd parties
- 44EXTERNALITYThose not directly involved in making a decision are affected by the actions of others
- 45MERIT GOODSmore private benefits than consumers actually realise
- 46ASYMMETRIC INFORMATIONinfo not equally shared between two parties
(e.g. doctors and patients) - 47REGRESSIVE TAXtax that takes a higher % from the income of the poor
- 48FREE MARKET MECHANISMsystem by which market forces of S + D determine prices + decisions made by consumers and firms
- 49PROGRESSIVE TAXTax that takes a higher % from income of the rich
- 50POSITIVE EXTERNALITYSocial benefits of an activity exceeds the private benefits
- 51NON RIVALRYConsumption by one does not affect the consumption by others
- 52INDIRECT TAXESa tax levied on goods + services
(e.g. VAT) - 53NEGATIVE EXTERNALITYsocial cost is greater than private cost
- 54TRADABLE PERMITallows owner to emit a certain amount of pollution
- if unused, can be sold
- aimed at larger manufacturers - 55PUBLIC GOODScollectively consumed + have characteristics of non-rivalry and non-excludability
- 56QUASI PUBLIC GOODSSome but not all characteristics of a public good
- 57NON-EXCLUDABILITYWhere an individual cannot be excluded from the consumption of a good or service
- 58EXTERNAL BENEFITSBenefits that occur as a consequence of externalities to 3rd parties
- 59BUFFER STOCKSSupplies of a product held in storage in case of a change in market conditions
- 60EXTENSION IN DEMANDIncrease in the quantity demanded caused by a fall in the price of a product
- 61COSTSAn expenditure incurred by a firm in producing a good or service
- 62DEMAND CURVEShows amount of a product consumers are willing and able to buy at different prices in a given period of time
- 63INTERPRETING XED - indications of positive XED-substitutes
-(below 1) weak
-(above 1) strong - 64INTERPRETING XED - indications of negative XED-complements
-(above -1) weak
-(below -1) strong - 65EVALUATING ELASTICITIES- factors of demand may change values
- estimates
- change over time
- questionable reliability - 66INTERPRETING YED -elastic -inelastic -perfectly inelastic- >1
-<1
-=1 - 67INTERPRETING PED -elastic -inelastic -unit elasticity- PED > 1
- 0 < PED < 1
- % change in P = % change in QD