Economics EOY

Need to learn all of these terms

Demand

The quantity of a good or service that consumers are willing and able to purchase in a given period of time at a given price, ceteris paribus.

Supply

The quantity of a good or service that producers are willing and able to provide in a given period of time at a given price, ceteris paribus.

Law of demand

Ceteris paribus, the quantity demanded of a good varies inversely with its price.

Market failiure

Market failure refers to the failure of the free market to achieve allocative efficiency, where too little or too much of good is produced and consumed relative to the socially optimal level of output where society's welfare is maximized.

Law of supply

Ceteris paribus, the quantity supplied of a good varies proportionally with its price.

Substitute

A good or service that can be used in the place of another and satisfies similar needs and wants.

Perfect competition

An idealised form of market structure wherein homogenous goods are provided, there are no barriers to entry and exit and firms are price-takers.

Oligopoly

A market structure where there are a few large firms who are interdependent on one another, with high barriers of entry.

Market

A process where buyers and sellers come together to carry out economic transactions

Monopolistic competition

A market structure where there are many firms and there are no barriers to entry but there is product differentiation.

Monopoly

A market structure where there is one single firm who sells a good or service. They set their own prices and there are very high barriers to entry.

Demerit good

A good that is overconsumed in society and produces negative externalities of consumption.

Merit good

A good that is underconsumed and produces positive externalities of consumption.

Negative externalities

The costs resulting from the production/consumption of a good or service incurred by third-parties.

Positive externalities

The benefits resulting from the production/consumption of a good or service incurred by third-parties.

Factors affecting PED

Substitutes, addictiveness, time period, income proportion and necessity?

Factors affecting PES

Spare capacity, time period, ease of production, availability of fop, length of production

Non-price competition factors for oligopoly

Brand advertising, product quality, product development

Merit goods

Goods that are deemed to be good by the government but are underconsumed by consumers, causing a market failure due to consumption under the socially optimum output level.

PED

The responsiveness of the quantity demanded of a good or service to changes in its price.

PES

The responsiveness of the quantity supplied of a good or service to changes in its price.

YED

The responsiveness of the quantity demanded of a good or service with respect to changes in income.

Cartel

A formal agreement between two or more firms in an oligopoly to reduce competition, increase market power and increase prices.

Collusion

A cooperative arrangement between firms to act together rather than compete

Public goods

Public goods are goods that are non-rivalrous and non-excludable and will not be provided by the free market.

Carbon tax

A fee levied by the government on the production of carbon gases, representing a tax on emissions rather than a tax on output

Subsidy

An amount of money provided to the producer to decrease the cost of production and thus make the good cheaper for the consumer.

Adverse selection

When one party has more information before a transaction

Moral hazard

When one party has more information after a transaction

Condition for allocative efficiency

P = MC

Condition for productive efficiency

AC = MC

Condition for dynamic efficiency

The firm should be making supernormal profits that can be reinvested into R&D.

Asymmetrical information

Asymmetric information refers to missing, unbalanced or inaccurate information that exists when one economic agent has more information than the other

Economies of scale

The cost advantages that businesses receive when they increase their production volume

Diseconomies of scale

When a company grows so large that its cost per unit begins to increase

Price leadership (oligopoly)

The dominant firm sets the price and smaller firms in the industry match the price to avoid price wars.

Monopoly power

The ability of a firm to set its own prices without losing customers to competitors

Market power

The ability of a firm to set its own prices.