Microeconomics AS & A-level definitions

studied byStudied by 2 people
0.0(0)
get a hint
hint

Ad valorem tax

1 / 157

Tags and Description

Economics

158 Terms

1

Ad valorem tax

An indirect tax where the value of the tax is dependent on the value of the good.

New cards
2

Asymmetric information

Where one party has more information than the other, leading to market failure.

New cards
3

Capital

One of the four factors of production; goods which can be used in the production process.

New cards
4

Capital goods

Goods produced in order to aid production of consumer goods in the future.

New cards
5

Ceteris paribus

All other things remaining the same.

New cards
6

Command economy

All factors of production are allocated by the state, so they decide what, how, and for whom to produce goods.

New cards
7

Complementary goods

Negative XED, if good B becomes more expensive, demand for good A fails.

New cards
8

Composite demand

Increase in demand for one good causes a fall in supply for another- 2 goods that require the same input.

New cards
9

Consumer goods

Goods bought and demanded by households and individuals.

New cards
10

Consumer surplus

The difference between the price the consumer is willing to pay and the price they actually pay.

New cards
11

Cross elasticity of demand (XED)

The responsiveness of demand for one good (A) to a change in price of another good (B).

New cards
12

Demand

The quantity of a good/service that consumers are able and willing to buy at a given price at a given moment in time.

New cards
13

Derived demand

when the demand for one product is determined by the demand for another product (cars and metal).

New cards
14

Diminishing marginal utility

The extra benefit gained from consumption of a good generally declines as extra units are consumed; explains why the demand curve is downward sloping.

New cards
15

Division of labour

The process of breaking up a task or job into interconnected sub-tasks, increasing efficiency.

New cards
16

Economic problem

The problem of scarcity; wants are unlimited but resources are finite so choices have to be made.

New cards
17

Efficiency

When resources are allocated optimally, so every consumer benefits and waste is minimised.

New cards
18

Enterprise

One of the four factors of production; the willingness and ability to take risks and combine the three other factors of production.

New cards
19

Equilibrium price/quantity

Where demand equals supply so there are no more market forces bringing about change to price or quantity demanded.

New cards
20

Excess demand

When the price is set too low so demand is greater than supply.

New cards
21

Excess supply

When price is set too high so supply is greater than demand.

New cards
22

External cost/benefit

The cost/benefit to a third party not involved in the economic activity; the difference between social cost/benefit and private cost/benefit.

New cards
23

Externalities

The cost or benefit a third party receives from an economics transaction outside of the market mechanism.

New cards
24

Free market

An economy where the market mechanism allocates resource so consumers and producers make decisions about what is produced, how to produce, and for whom.

New cards
25

Free rider problem

People who don't pay for a public good still receive benefits from it so the private sector will under-provide the good as they can't make a profit.

New cards
26

Government failure

When government intervention leads to a net welfare loss in society.

New cards
27

Habitual behaviour

A cause of irrational behaviour; when consumers are in the habit of making certain decisions.

New cards
28

Incidence of tax

The tax burden on the taxpayer.

New cards
29

Income elasticity of demand (YED)

The responsiveness of demand to a change in income.

New cards
30

Indirect tax

Taxes on expenditure which increase production costs and lead to a fall in supply.

New cards
31

Inferior goods

YED<0; goods which see a fall in demand as income increases.

New cards
32

Information gap

When an economic agent lacks the information needed to make a rational, informed decision.

New cards
33

Information provision

When the government intervenes to provide information to correct market failure.

New cards
34

Joint demand

When demand for a good increases, demand for the complementary good increases (fish and chips).

New cards
35

Labour

One of the four factors of production; human capital.

New cards
36

Land

One of the four factors of production; natural resources such as oil, coal, wheat, physical space.

New cards
37

Luxury goods

YED>1; an increase in incomes causes an even bigger increase in demand.

New cards
38

Market failure

When the free market fails to allocate resources to the best interest of society, so there's an inefficient allocation of scarce resources.

New cards
39

Market forces

Forces in free markets which act to reduce prices when there's excess supply and increase them when there's excess demand.

New cards
40

Maximum price

A ceiling price which a firm can't charge above.

New cards
41

Minimum price

A floor price which a firm can't charge below.

New cards
42

Mixed economy

Both the free market mechanism and the government allocate resources.

New cards
43

Model

A hypothesis which can be proven or tested by evidence; it tends to be mathematical whilst a theory is in words.

New cards
44

Negative externalities of production

Where the social costs of producing a good are greater than the private costs of producing the good.

New cards
45

Non-excludable

A characteristic of public goods; someone can't be prevented from using the good.

New cards
46

Non-renewable resources

Resources which can't be readily replenished or replaced at a level equal to consumption; the stock level decreases over time as they are consumed.

New cards
47

Non-rivalry

A characteristic of public goods; one person's use of the good doesn't prevent someone else from using it.

New cards
48

Normal goods

YED>0; demand increases as income increase.

New cards
49

Normative statement

Subjective statements based on value judgements and opinions; can't be proven or disproven.

New cards
50

Opportunity cost

The benefit forgone of the next best alternative.

New cards
51

Perfectly price inelastic good

PED/PES=0; quantity demanded/supplied doesn't change when price changes.

New cards
52

Perfectly price inelastic good

PED/PES=0; quantity demanded/supplied falls to 0 when price changes.

New cards
53

Positive externalities of consumption

Where the social benefits of consuming a good are larger than the private benefits of consuming that good.

New cards
54

Positive statement

Objective statements which can be tested with factual evidence to be proven or disproven.

New cards
55

Price elasticity of demand (PED)

The responsiveness of demand to a change in price.

New cards
56

Price elasticity of supply (PES)

The responsiveness of supply to a change in price.

New cards
57

Price mechanism

The system of resource allocation based on the free market movement of prices, determined by the demand and supply curves.

New cards
58

Private cost/benefit

The cost/benefit to the individual participating in the economic activity.

New cards
59

Private goods

Goods that are rivalry and excludable.

New cards
60

Producer surplus

The difference between the price the producer is willing to charge and the price they actually charge.

New cards
61

Production possibility frontier (PPF)

Depicts the maximum productive potential of an economy, using a combination of two goods or services, when resources are fully and efficiently employed.

New cards
62

Public goods

Goods that are non-excludable and non-rivalry.

New cards
63

Rationality

Decision-making that lead to economics agents maximising their utility.

New cards
64

Regulation

Laws to address market failure and promote competition between firms.

New cards
65

Relatively price elastic good

When PED/PES>1; demand/supply is relatively responsive to a change in price so a small change in price leads to a large change in quantity demanded/supplied.

New cards
66

Relatively price inelastic good

When PED/PES<1; demand/supply is relatively unresponsive to a change in price so a large change in price leads to a small change in quantity demanded/supplied.

New cards
67

Renewable resources

Resources which can be replenished, so the stock of resources can be maintained over a period of time.

New cards
68

Scarcity

The shortage of resources in relation to the quantity of human wants.

New cards
69

Social cost/benefit

The cost/benefit to society as a whole due to the economic activity.

New cards
70

Social optimum position

Where social costs equal social benefits; the amount which should be produced/consumed in order to maximise social welfare.

New cards
71

Social science

The study of societies and human behaviour.

New cards
72

Specialisation

The production of a limited range of goods by a company/country/ individual so they aren't self-sufficient and have to trade with others.

New cards
73

Specific tax

A tax imposed on a good where the value of the tax is dependent on the quantity that is bought.

New cards
74

State provision of goods

Through taxation, the government provides public goods or merit goods which are underprovided in the free market.

New cards
75

Subsidy

Government payments to a producer to lower their costs of production and encourage them to produce more.

New cards
76

Substitutes

Positive XED; if good B becomes more expensive, demand for good A rises.

New cards
77

Supply

The ability and willingness to provide a particular good/service at a given price at a given moment in time.

New cards
78

Symmetric information

Where buyers and sellers both have access to the same information.

New cards
79

Trade pollution permits

Notional units of allowed pollution that are bought and sold between firms; may create an incentive to reduce the amount they pollute.

New cards
80

Unitary price elastic good

When PED/PES=1; a change in price lead to a change in output by the same proportion.

New cards
81

Utility

The satisfaction derived from consuming a good.

New cards
82

Weakness at computation

A cause of irrational behaviour; when consumers are bad at making calculations, estimating probabilities and working out future benefits/costs.

New cards
83

Allocative efficiency

When resources are allocated to the best interests of society, when there is max social welfare and max utility P=MC.

New cards
84

Asymmetric information

When one party has more information than the other, leading to market failure and causing problems for regulators.

New cards
85

Average cost/average total cost (AC/ATC)

The cost of production per unit: total costs / quantity produced.

New cards
86

Average revenue (AR)

The price each unit is sold for: TR / quantity sold.

New cards
87

Bilateral monopoly

When there is only one buyer and one seller in the market.

New cards
88

Cartels

A formal collusive agreement where firms enter into an agreement to mutually set prices.

New cards
89

Collusion

Occurs when firms agree to work together, setting a price or producing fixed quantity.

New cards
90

Competition policy

Government action to increase competition in markets.

New cards
91

Competitive tendering

When the government contracts out the provision of a good or service and invites firms to bid for the contract.

New cards
92

Conglomerate integration

The merger of firms with no common connection.

New cards
93

Constant returns to scale

Output increases by the same proportion that the inputs increase by.

New cards
94

Contestable market

When there is the threat of new entrants into the market, forcing firms to be efficient.

New cards
95

Decreasing returns to scale

An increase in inputs by a certain proportion will lead to output increasing by a smaller proportion.

New cards
96

Demergers

A single business is broken down into two or more businesses to operate on their own, to be sold or to be dissolved.

New cards
97

Deregulation

The removal of legal barriers to allow private enterprises to compete in a previously protected market.

New cards
98

Derived demand

The demand for one good is linked to the demand for a related good.

New cards
99

Diminishing marginal productivity

If a variable factor is increased when another factor is fixed, there will come a point when each extra unit of the variable factor will produce less extra output than the previous unit; after a certain point, marginal output falls.

New cards
100

Diseconomies of scale

The disadvantage that arise in large businesses that reduce efficiency and cause average costs to rise.

New cards

Explore top notes

note Note
studied byStudied by 20 people
Updated ... ago
4.0 Stars(1)
note Note
studied byStudied by 144 people
Updated ... ago
5.0 Stars(2)
note Note
studied byStudied by 4 people
Updated ... ago
5.0 Stars(1)
note Note
studied byStudied by 11009 people
Updated ... ago
4.9 Stars(52)
note Note
studied byStudied by 63 people
Updated ... ago
4.0 Stars(1)
note Note
studied byStudied by 8 people
Updated ... ago
5.0 Stars(1)
note Note
studied byStudied by 2 people
Updated ... ago
5.0 Stars(1)
note Note
studied byStudied by 77 people
Updated ... ago
5.0 Stars(1)

Explore top flashcards

flashcards Flashcard39 terms
studied byStudied by 2 people
Updated ... ago
5.0 Stars(1)
flashcards Flashcard31 terms
studied byStudied by 11 people
Updated ... ago
5.0 Stars(1)
flashcards Flashcard40 terms
studied byStudied by 133 people
Updated ... ago
5.0 Stars(1)
flashcards Flashcard52 terms
studied byStudied by 15 people
Updated ... ago
5.0 Stars(1)
flashcards Flashcard37 terms
studied byStudied by 14 people
Updated ... ago
5.0 Stars(7)
flashcards Flashcard49 terms
studied byStudied by 5 people
Updated ... ago
5.0 Stars(1)
flashcards Flashcard31 terms
studied byStudied by 2 people
Updated ... ago
5.0 Stars(1)
flashcards Flashcard306 terms
studied byStudied by 5 people
Updated ... ago
5.0 Stars(1)