economics revision 1

Hyper inflation

This is an extremely rapid, accelerating rise in prices, typically over 50% per month

Perfect competition

Perfect competition is an idealised market structure with many buyers/sellers, identical products, free entry and exit, and perfect information.

What are the 4 market structures

Oligopoly, monopoly, monopolistic competition, perfect competition

Invisible hand

How individuals pursuing their own self interest in a free market unintentionally benefit society as a whole, leading to efficient resource allocation and market equilibrium without central planning.

Oppurtunity cost

The value of the next best alternative you give up when making a choice, representing potential benefits missed by not choosing another option

Aggregate demand

Aggregate Demand (AD) is the total demand for all final goods and services in an economy at a given price level,

Characteristics of monopoly

Single seller

No close substitutes

High barriers to entry

Price maker

Profit maximisation

Types of monopoly

Natural monopoly

Government created monopoly

Resource monopoly

Characteristics of monopoly

Few dominant firms

High barriers to entry

Interdependence

Product differentiation

Potential for collusion

Budget line

A budget line shows the different combinations of two goods a consumer can afford with a fixed income and set prices

Inflation rate

The inflation rate is the percentage increase in the general price level of goods and services over time, usually measured annually, showing how much the purchasing power of money has decreased.

Marginal cost

Marginal cost measures the change in a firms total production cost when the quantity produced is increased by one unit

Indifference curve

An indifference curve is a graph in economics showing different combinations of two goods that provide a consumer with the same level of satisfaction or utility

What is the deposit multiplier

Deposit multiplier = 1 / Required reserve ratio

Liquidity ratio

A liquidity ratio measures a company’s ability to cover its short term solvency.

Monetary policy

Monetary policy uses tools like interest rates and money supply controls by central banks to manage inflation, employment, and economic growth

What is money supply

It’s the total amount of money in an economy, measured in different ways (M0, M1, M4)

Balance of payments

This is a comprehensive record of all economic transactions between a country and the rest of the world over time,

Economies of scale.

These are the cost advantages businesses gain as they increase production, leading to. Lower average cost per unit.

Employment

Employment refers to the number of people in paid work or self employment

Microeconomics

the study of how households and firms makes decisions and how they interact

Macroeconomics

the study of economy wide phenomenon

Credit creation

This is the process where commercial banks expand the money supply

Total cost

Total cost represents all the explicit and implicit expenses involved in the production process.

Total fixed cost

Total fixed cost consists of expenses that remain constant in the short run, even if output is zero

Marginal rate of submission

The marginal rate of submission/substitution (MRS) shows how much of one good a consumer will give up for one more unit of another good

Law of diminishing returns

The marginal rate of submission/substitution (MRS) shows how much of one good a consumer will give up for one more unit of another good

GDP

Gross domestic Product (GDP) is the total monetary value of all final goods and services produced within a country’s borders in a specific time period.

Elasticity of demand

Elasticity of demand in economics measures how sensitive the quantity demanded of a good or service is to change its price.

The circular flow of income

This is a core economic model showing how money, goods, and services continuously move between households and firms in an economy

Appreciation and depreciation

Appreciation means a currency’s value increases, buying more foreign currency, making imports and exports pricier. While depreciation is a currency’s value decreasing, buying less foreign currency, making imports costlier and exports cheaper for foreigners