micro economics Flash Cards

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Title: micro economics
Description: glossary of micro economic key words
Number of Cards: 30
Save Count: 0
Author: simoncrg11
Created: 2011-12-04
Tags: economics
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    • Question
    • Answer
    • Side 3
    • postive statement
    • a statement that can be proven right or wrong
    • normative statement
    • a statement of opinion
    • planned economies
    • all decisions on what and how much to produce are made by the government, all resources are collectively owned
    • free market economies
    • prices are used to ration goods and services demand and supply determine price and wages in the economy
    • transition economies
    • economies that are in the process of moving away from planned to free market economies eg poland
    • demand
    • quantity of a good or service that consumer are willing and abet o purchase in a given time period
    • law pf demand
    • as price falls quantity demanded increases given certis paribus
    • real income
    • the amount of income used to buy goods and services
    • normal good
    • as real income increaes demand increases
    • inferior goods
    • as real income decreases demand decreases
    • substitute products
    • a product that you could buy in place of another ie mo3 vs ipod
    • complementary good
    • good often bought together ie xbox and games
    • supply
    • the willingness and ability of a producer to produce as quantity of a good or service at a given price over a period of time
    • law of supply
    • as p rises q increases
    • factors of production
    • land labour capital entrepaneurship
    • ceritis paribus
    • when all other factors remain equal
    • indirect taz
    • tax on expenditure
    • subsidies
    • payments made by gvt to increase supply by lowering cost of production
    • price equilibrium
    • D=S
    • max price/floor price
    • price set below the equilibrium to ensure all can afford the good
      effect: causes a shortage as firms lose revenue
    • parallel market
    • where product is sold at prices aboven the max price but below ep
      illegal trade
    • shortage
    • excess demand
      D>S
    • `min price/ceiling price
    • where priceis set above the equilirium causing surplus
      D<S
    • buffer stock
    • where gvt buys up excess supply to use when supply is not so good pften used in unstable industries such as agriculture
    • commodity agreements
    • where different countries work together to maintian a buffer stock
    • PED
    • price elasticity of demand = percentage change in q demanded/percentage change in price
    • inelastic PED
    • when PED is less than 1 and greater than 0. a change in price leads to a smaller percentage change in q demanded
    • elastic PED
    • When PED is greater than 1 and less than infinity a change in price leads to a greater percentage change in q demanded
    • unitary elastic
    • where PED equals 1 where a change in price leads to proportionally equal change in q demanded
    • XED
    • cross elasticity of demand measures the change in demand when there is a change of price in another %change in q of product a/%change in p of product b