Important econs definitions

from all chapters

production possibility curve

all possible combinations of goods and services produced assuming all resources are efficiently and fully utilised in a given period with given state of technology and scarce resources

PES

measures the responsiveness of a change in quantity supplied when there is a change in price, ceteris paribus

asymmetric information

unequal knowledge possessed by the parties to a market transaction whereby the parties involveddo not have the same amount of knowledge and result in inefficient market outcomes

balance of payments

comprehensive record of the country’s international receipts and international payments between the residents and government of a country and rest of the world over a period of time

current account

records receipts and payments from exports and imports of goods and services as well as income flows and transfers between countries over the course of a year

KFA

records the flow of funds into and out of the country and is associated with the changes in ownership of assests

internal economies of scale

reductions in long run average costs enjoyed by a firm as a result of expanding its output

diseconomies of scale

when the firm gets too large and there is internal diseconomies of scale ie cost disadvantages accruing to a firm as a result of the expansion of the firm

external economies of scale

cost savings that accrue to individual firms in an industry because of the expansion of the industry

price discrimination

selling the same good/service at different prices to different groups of consumers but not for cost reasons

prerequisites: must have enough market power to segment the market, the diff groups of consumers have different PED and the good cannot be resold

barriers to entry (natural/artificial)

obstacles preventing new competititors from competing on the same level as established firms in the industry

conglomeration

parent company acquires subsidiaries → can be either horizontal or vertical integration

sunk cost fallacy

when a person’s decision is affected by fixed costs rather than the marginal costs eg. paid loyalty membership program

loss aversion bias

tendency for people to prefer avoiding a loss over making an equivalent or greater gain eg. work contract fees

saliency bias

tendency for people to focus on information that is more prominent over other less prominent but equally relevant information

productive efficiency

production of goods and services at the lowest possible average COP

allocative efficiency

optimal allocation of resources to produce the combination of goods and services that maximises societal welfare

dynamic efficiency

requires firms to engage inproduct and process innovation and improve products

balance of payments

a comprehensive record of the country's international receipts and international payments between the residents and the government of a country and the rest of the world over a period of time (usually a calendar year)

balance of trade

the difference between the value of a country’s imports and exports for a set period eg calendar year

market failure

Market failure occurs when the free market fails to achieve allocative efficiency.

inclusive economic growth

sustained economic growth without any widening or worsening of the income/wealth gap

inequity

Economic inequality refers to disparities among individuals' incomes and wealth - unfair distribution of resources (likely to be tested as a source of MF!)

non-excludability

a good that is impossible/very unfeasible to exclude certain people ie non-payers from consuming the good once it is provided

non-rivalrous

when one person consumes the good, it does not diminish the quantity of the good available for others to use at the same time

non-rejectable

once provided, people cannot opt out of consuming it

globalisation

free international flow of goods, services, capital and labour

CPI - consumer price index

measures the change in price of a representative basket of goods and services within a country (over time)

core inflation

measures the changes in price of goods and services of a basket of goods excluding some volatile ones eg energy and food

HDI

used by the UN to measure a country’s level of development and comprises of life expectancy at birth, mean years of schooling, expected years of schooling and gross national income per capita

purchasing power parity

measurement of prices in different countries that uses the prices of specific goods to compare the absolute purchasing power of the countries’ currencies

gini coefficient

The coefficient measures the dispersion of income or distribution of wealth among the members of a population from a scale of 1 (perfectly inequal distribution) to 0 (perfectly equal distribution)

globalisation

a phenomenon where economies are increasingly integrated and interdependent

negative externality

spill over costs associated with over production/consumption of a good/service to a thirs party not involved in the production/consumption and receives no compensation

national income

the total monetary value

firms and decisions

national income accounting stuff