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82 Cards in this Set
- Front
- Back
Demand |
The quantity of a good consumers are willing and able to buy at a given price per period |
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Supply |
The quantity of a good producers are willing and able to sell at a given price per period |
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Market |
Institution where buyers are in contact with sellers to arrange sale of goods |
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Equilibrium |
The price and quantity traded which is acceptable to buyers and sellers so long as conditions of demand and supply stay constant |
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Ceteris Paribus |
All other factors remaining constant |
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Disequilibrium |
A combination of price and quantity traded which has a tendency to change for the given demand and supply conditions |
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Joint Demand |
When demand for one good involves the demad for another good e.g. Printer and Printer Ink |
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Joint supply |
Where supply of one good necessarily involves the supply of another e.g. Beef and Leather |
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Derived Demand |
Demand for a product (or FoP) which is demanded because of the demand of the final product it contributes to e.g. Labour |
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Composite Demand |
Where a good is demanded for 2+ separate uses e.g. Crude Oil |
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Elasticity of Demand (PeD) |
The responsiveness of quantity demanded to a change in price Formula: PeD = %Qd/ %P |
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Income Elasticity of Demand (YeD) |
The responsiveness of quantity demanded to a change in income Formula: YeD = %Qd/ %Y |
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Cross Elasticity of Demand (XeD) |
The responsiveness of quantity demanded of one good (A) to a change in price of another (B) Formula: XeD = %Qd (A)/ %P (B) |
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Elasticity of Supply (PeS) |
The responsiveness of quantity supplied to a change in price Formula: PeS = %Qs/ %P |
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Normal Good |
Good whose demand rises as income rises |
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Inferior Good |
Good whose demand falls as income rises |
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Substitute Good |
Good which is an alternative to a particular good from the consumers point of view |
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Sales tax (Indirect Tax) |
Tax levied on the sale of goods |
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Subsidy |
Gov. payment to produces for production of goods intended to lower the market price |
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Depreciation (of Capital) |
The rate at which capital loses value over time |
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Home Production |
Unpaid work within households e.g. Childcare, gardening --> boost standards of living without increasing GDP |
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Opportunity Cost |
The value (benefit) of the next best option foregone |
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Production Possibility Frontier (PPF) |
The combinations of two goods which an economy is capable of producing using all its resources in the most efficient way |
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Productive Efficiency |
Where production in an economy occurs when all the FoP are fully utilised & are producing output with the min. of factor inputs currently feasible |
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Pareto Efficient |
Where nobody can be made better off without making someone else worse off (i.e. on the PPF curve) (An economic state where resources are allocated in the most efficient manner) |
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Positive Economics |
The study of propositions which can be proved or disproved by data from the real world e.g. Inflation is 2% in the UK |
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Normative Economics |
The study of propositions which cannot be verified by data and require judgements e.g. Inflation should be increased |
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Specialisation |
The conc. of a worker, firm, region or country to produce a narrow range of goods and services |
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Division of Labour |
Where labour specialises in the performance of a particular part of the production process |
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Money |
Whatever is generally acceptable in exchange for goods & services or labour |
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Unit Cost (Average Cost/ AC) |
Cost per unit of output Forumla: AC = Total Cost / Output |
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Productivity |
A measure of efficiency. (Output per factor input) e.g. Labour productivity = Output/ Man hour or Capital productivity = Output/ Machine |
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Economies of Scale |
The gains in efficiency (fall in unit costs) from expanding the scale of production. (increasing FoP long run) |
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Diseconomies of Scale |
The rise in unit cost as a firm expands its scale of production in the long run |
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Scarcity |
Where wants for a product/ FoP exceeds the amount available (Infinite wants + limited resources) |
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Factor of Production |
A productive resource including Land, Labour, Capital and Enterprise |
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Capital |
Man made aids to production e.g. machines, buildings |
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Enterprise (Entrepreneurship) |
Risk taking role undertaken by owners of a business as they combine other FoP in the pursuit of profit |
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Profit |
A financial gain Total Revenue - Total Costs |
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Investment |
Spending by firms on new capital / repair of existing stock (per period) |
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Market Failure |
Where free market outcomes lead to major problems for society, usually inefficiency |
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Government Failure |
Where government intervention causes inefficiency in resource allocation |
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Cobweb Theory |
Theory explaining fluctuations in market price and quantity over time |
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Minimum Price (Price Floor) |
a guaranteed price at which producers can sell their output |
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Maximum Price (Price Ceiling) |
Price above which producers and consumers cannot legally trade |
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Buffer Stock Scheme |
Scheme to maintain market price received by producers between a minimum and maximum |
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Common Agricultural Policy (CAP) |
EU programme to intervene in the agricultural market to support the welfare of European farmers |
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Tariff |
Tax levied on an import |
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Monopoly |
A single seller in the market or industry (Competition Commission Criteria: firm with over 25% of market share) |
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Public Good |
Good with non excludability and non rivalry (Therefore almost impossible for prvt. firms to sell profitably)
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Quasi Public Good |
Goods which exhibit partial non excludability and non rivalry |
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Private good |
Good which is both rival and excludable |
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Merit Good |
A good which consumers under consume at market prices because they underestimate the long term benefit to themselves |
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Economic Good |
Good that has an opportunity cost |
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Free Good |
Good which has no opportunity cost |
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Demerit Good |
A good which consumers over consume at market prices because the underestimate the long term harm to themselves |
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Labour Immobility |
Where workers cannot move into alternative employment in other regions or occupations |
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Local Authority or (Council) Housing |
Houses owned by local councils which are rented to poorer households at low rents |
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Green Belt |
Area around urban areas where no property is allowed without special permission |
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Starter Home Initiative |
Interest free loan offered to certain public sector workers to help them live in London |
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Affordable Housing Regulations |
Gov. rules which set a quota for houses with a new development which must be relatively cheap to buy |
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Negative Externality |
Side effect of a market activity which harms 3rd parties without compensation |
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Positive Externality |
A side effect of a market activity which benefits 3rd parties without them having to pay |
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Property Right |
Legal entitlement to the exclusive use of a resource |
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Marginal Private Cost (MPC) |
The addition to total cost to the firm from an extra unit of production |
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Marginal External Cost (MEC) |
The additional external cost suffered by the 3rd party from an extra unit of production |
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Marginal Social Cost (MSC) |
The additional cost to society from an extra unit of production MSC= MPC + MEC |
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Marginal Private Benefit (MPB) |
The additional benefit to the consumer from an extra unit of production |
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Marginal External Benefit (MEB) |
The additional external benefit to third parties from an extra unit of production |
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Marginal Social Benefit (MSB) |
The additional benefit to society from an extra unit of production MSB= MPB + MEB |
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Socially Optimal Production |
Output where allocative efficiency is maximised MSB = MSC |
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Deadweight Loss |
Net welfare lost from not producing at the socially optimal production |
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The Market Mechanism |
The process through which markets solve the problem of allocating scarce resources between competing uses |
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Economic Systems |
Institutional means for resolving the problems or resource allocation in an economy i.e what how and whom to go to/ to produce |
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Mixed Economy |
Resource allocation is undertaken by state planning & market forces depending on the product |
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Capitalist (Free Market) Economy |
Where markets determine resource allocation with minimal state intervention |
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Invisible Hand |
Resources are allocated by the decentralised decision making of consumers & producers acting through markets, without any state planning |
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Consumer Sovreignty |
Production of goods is directed by consumer demand |
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Laissez Faire |
Where gov. doesn't interfere with the functioning of markets |
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Consumer Surplus |
Difference between the total amount consumers are willing and able to pay for a good or service (indicated by the demand curve) and the amount they actually pay (Market Price) |
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Producer Surplus |
The difference between what the producers are willing and able to supply a good for and what they actually recieve |
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Regressive Tax |
Tax is regressive when low income earners pay a higher proportion of their income in tax than high earners |