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84 Cards in this Set
- Front
- Back
What is scarcity? |
Scarcity: Where wants of a product (or a factor of prodution) exceed the amount available (where demand exceeds supply at zero price) |
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What is a factor of production? |
Factor of Production: A productive resource There are 4 types: land, labour, capital and enterprise |
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What is capital? |
Capital: Man-made aids to production |
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What is enterprise? |
Enterprise: The risk-taking role undertaken by owners of a buissness as they combine other factors of production in the persuit of profit |
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What is human capital? |
Human Capital: The ability of workers to add value to production |
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What are renewable resources? |
Renewable resources: Category of natural resources which can reproduce without human effort |
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What is Investment? |
Investment: Spending by firms on new capital stock or repair of existing stock |
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What is depreciation (of capital)? |
Depreciation (of Capital) : The rate at which capital loses value over time. |
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What is opportunity cost (O/C)? |
Opportunity cost (O/C) : The value (benfit) of the next best alternative foregone |
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What is a production possibility frontier (PPF)? |
Production Possibility Frontier: The combinations of two goods which an economy is capable of producing using all it's resources in the most efficient way |
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What is specialisation? |
Specialisation : Where a factor of production is devoted to a specific job in the production process |
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What is the division of labour? |
Division of Labour : Where labour specialises in the performance of a particular part of the production process |
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What is a positive statement? |
Positive statement : A proposition which can be verified (proved or disproved) by data from the real world |
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What is a normative statement? |
Normative statement : A proposition which cannot be verified by data from the real worls and requires a value judgement (eg should) |
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What is demand (D)? |
Demand (D) : The quantity of a good consumers are willing and able to buy at a given price |
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What is supply (S)? |
Supply (S) : The quantity of a good producers are willing and able to sell at a given price |
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What is the market? |
Market : Institution where buyers are in contact with sellers to arrange a sale of goods |
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What is an equilibrium? |
Equilibrium : The price and quantity (traded) which is acceptable to both buyers and sellers so long as conditions of demand and supply stay constant i.e. neither excess demand or excess supply exists at this market place, also known as market equilibrium |
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What does "ceteris paribus" mean? |
"Ceteris Paribus": All other factors remaining constant |
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What is disequilibrium? |
Disequilibrium: A combination of price and quantity traded which has a tendancy to change for the given demand and supply conditions i.e. excess demand or supply |
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What is joint demand? |
Joint Demand: When demand of one good involves demand for another good (complements) e.g. Tennis rackets and Tennis balls |
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What is joint supply? |
Joint Supply : When supply of one good necessarilly involves supply of another e.g. beeswax and honey |
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What is consumer surplus (CS)? |
Consumer Surplus (CS): Measure of consumer welfare: the maximum price a consumer is willing to pay for a good minus the market price |
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What is producer surplus (PS)? |
Producer Surplus (PS): Measure of producer welfare: the surplus of market price recieved over the minimum price the producer would be prepared to accept |
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What is price elasticity of demand (PeD)? |
Elasticity of Demand (PeD): The responsiveness of quantity demanded to a change in price (ceteris paribus) % change in Qd / % change in price - Inelastic if between 0 and -1 - elastic if greater than -1 - unitary elasticity if = -1 |
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What is income elasticity of demand (YeD)? |
Income Elasticity of Demand (YeD): The responsiveness of quantity demand to a change in income (ceteris paribus) % change in Qd / % change in income + = normal good - = inferior good |
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What is cross elasticity of demand (XeD)? |
Cross Elasticity of Demand (XeD): The responsiveness of quantity demanded of one good (A) to a change in price of another good (B) (ceteris paribus) % change in Qd of A / % change in price of B + = complimentary goods - = substitute goods |
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What is price elasticity of supply (PeS)? |
Elasticity of Supply (PeS): The responsiveness of quantity supplied to a change in price. % change in Qs / % change in price |
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What is a normal good? |
Normal Good: Good whose demand rises as income rises |
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What is an inferior good? |
Inferior Good: Good whose demand falls as income rises |
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What is a substitute good? |
Substitute Good: Good which is an alternative to a particular good from the consumer's point of vue |
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What is the labour market? |
Labour Market: The institutional arrangements whereby employmet (i.e. filled job vacancies) and conditions of work (including wages) are agreed between workers (who supply their labour) and employers (who demand it) |
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What is demand for labour?
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Demand for labour: The number of workers (or worker hours) a firm (or industry) is willing and able to hire at a given wage rate
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What is derived demand for labour? |
Derived demand for labour: Labour is only demanded (by employers) because of the output it can produce and not because firms want workers in their own right |
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What is elasticity of demand for labour? |
Elasticity of Demand for Labour: The responsiveness of demand for labour to a change in wage rate |
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What is the supply of labour? |
Supply of Labour: The number of workers a firm can attract at a given wage rate |
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What are non pecuniary benefits? |
Non Pecuniary Benefits: Advantages for workers in a particular job which makes them willing to do the job for a lower pay |
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What is the elasticity of supply of labour? |
Elasticity of Supply of Labour: The responsiveness of supply of labour to a change in wage (ceteris paribus) |
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What is migration? |
Migration: The movement of population from one country to another (to change residency) |
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What are trade unions (TU)? |
Trade Unions (TU): An organisation of workers financed by membership fees which aims to further the interests of it's members e.g. negotiating with management to improve working conditions (trade unions = monopoly seller of labour) |
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What is the national minimum wage (NMW)? |
National Mininum Wage: A floor below which wages cannot legally fall |
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What is classical unemployment (U/E)? |
Classical Unemployment (U/E): Unemployment due to real wages being above the market clearing level |
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What is the economic system? |
Economic System: The institutional means for deciding how scarce resources are allocated in an economy (i.e. what to produuce, how to produce it and to whom should it go) |
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What is a mixed economy? |
Mixed Economy: Where resource allocation is undertaken by state planning and market forces, depending on the product |
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What is a capitalist economy (Free Market economy)? |
Capitalist Economy: Where markets determine resource allocation with minimal state intervention |
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What is a command economy (Planned economy)? |
Command Economy: Where resources are allocated according to centralised state planning |
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What is the stock market? |
Stock market: Institution where financial assets (e.g. company shares and government bonds) are traded |
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What is the "invisible hand"? |
Invisible hand: Where resources are allocated by the decentralised decision making of consumers and producers acting through markets, without any centralised (state) planning |
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What is consumer sovereignty? |
Consumer Sovereignty: The production of goods is directed by consumer demand |
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What is "Laissez faire"? |
Laissez Faire: Where government does not interfere with the functioning of markets |
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What is market failure? |
Market Failure: Where free market outcomes lead to major problems for society, usually inefficiency |
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What is government failure? |
Government Failure: Where government intervention causes inefficiency in resource allocation |
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What is sales tax? |
Sales tax: Tax levied on the sale of goods e.g. VAT |
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What is a subsidy? |
Subsidy: Government payments to producers for production of goods intended to lower the market price |
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What is a minimum price (Price floor)? |
Minimum Price: A guaranteed price at which producers can sell all their output |
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What is a maximum price (Price ceiling)? |
Maximum Price: Price above which producers or consumers cannot legally trade |
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What is a buffer stock scheme? |
Buffer Stock Scheme: Scheme to maintain market price received by producers between a minimum and maximum (between a Price floor and Price ceiling) |
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What is a tariff? |
Tariff: Tax levied on imports |
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What is common agricultural policy (CAP)? |
Common Agricultural Policy (CAP): EU policy to support farmers in the EU with guaranteed minimum price and tariffs on imports |
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What is a monopoly? |
Monopoly: A single seller in the market or industry (firm with over 25% of market share) |
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What is a public good?
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Public Good: A good with non-ecludability and non-rivalry ( which is therefore almost impossible for private firms to sell profitably)
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What is a merit good? |
Merit Good: A good which consumers underconsume at market prices because they underestimate the long term benefits to themselves |
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What is a demerit good? |
Demerit Good: A good which consumers overconsume at market price because they understimate the long term harm to themselves |
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What is assymetric information? |
Assymetric Information: Situation where buyers more about the value of a product than sellers (or vice versa) |
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What is a negative externality? |
Negative Externality: A side effect of market activity which harms third parties without compensation |
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What is a positive externality? |
Positive Externality: A side effect of market activity which benefits third parties without them having to pay |
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What is structural geographical unemployment? |
Structural Geographical Unemployment: Unemployment due to geographical mismatch between the job vacancies and the unemployed with those skills |
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What is structural occupational unemployment? |
Structural Occupational Unemployment: Unemployment due to mismatch of skills demanded (in job vacancies) and skills supplied by the unemployed within that region |
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What is property right? |
Property right: A legal entitlement (which can be bought or sold) to the exclusive use of a resource |
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What is marginal private cost (MPC)? |
Marginal Private Cost (MPC): The addition to total cost to the firm from an extra unit of production |
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What is marginal external cost (MEC)? |
Marginal External Cost (MEC): The additional (external) cost suffered by third parties from an extra unit of production |
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What is marginal social cost (MSC)? |
Marginal Social Cost (MSC): The additional cost to society (i.e. firms + third parties) from an extra unit of production |
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What is marginal private benefit (MPB)? |
Marginal Private Benefit (MPB): The additional benefit to the consumer from an extra unit of production |
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What is marginal external benefit (MEB)? |
Marginal External Benefit (MEB): The additional (external) benfit to third parties from an extra unit of production |
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What is marginal social benefit (MSB)? |
Marginal Social Benefit (MSB): The additionsal benefit to society (i.e. consumers + third parties) from an extra unit of production |
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What is socially optimum production? |
Socially Optimum Production: Output where allocative efficiency is maximised (i.e. MSB = MSC) |
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What is deadweight loss? |
Deadweight Loss: Net welfare lost from not producing at the socially optimal prduction |
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What is optimal tax? |
Optimal Tax: Tax equal to marginal external cost (MEC) (persuading profit maximising firms to choose socially optimal production) |
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What is road pricing? |
Road Pricing: Charging drivers for journeys they make, based in road location, length of journey and time of day |
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What is regulation? |
Regulation: Rules from the government requiring firms to modify their production techniques, output or price |
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What are tradble permits? |
Tradable permits: A legal right to pollute a fixed amount which can be bought or sold between firms |
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What is a renewable energy certificate (or a renewable energy credit) (REC)? |
Renewable Energy Certificate (REC): A tradable document proving that a certain amount of energy was generated from renewable sources e.g. solar, wind |
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What is carbon offsetting? |
Carbon Offsetting: System which generates credits for any activity which reduces net greenhouse gases |
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What is cost benefit analysis? |
Cost Benefit Analysis: Technique used to assess whether public sector projects are likely to produce net welfare gains to society |