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Definition
| Study of behavior of individual consumers, firms, industries and determination of market prices, quantities of good, services, and factors of production |
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| The study of aggregate economic activity |
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| All other things being held equal |
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| Limited availability of economic resources relative to society's unlimited demand for goods and service |
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| Physical factor of production |
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Definition
| Human factor of production. |
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| Factor of production that comes from investiment in phsycial and human capital |
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| The next best alternative when an economic decision is made |
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| The satisfaction derived by an individual after consuming a good or service |
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Term
| Production Possibility Curve |
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Definition
| Curve showing maximum that can be produced by an economy at any given time |
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Definition
| Actual production of goods and services in a given time period |
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| The willingness and ability to purchase a good at a given price at a given time |
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| As price falls, demand increases |
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| Exception. As price increases, demand increases |
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| Exception. As price increases, so does demand as consumers on low incomes are dependant on the good for survival. |
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Definition
| The willingness and ability of a producer to produce a quanitity of a good or service at a given price at a given time. |
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| As Price Rises, so will supply |
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| The Market Clearing Price. Demand = Supply |
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Definition
| The 'floor price' imposed by an authority. |
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| Price Elasticity of Demand |
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Definition
| A measure of the Demands responsiveness to a change in price of a good. |
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Definition
| Measure of the responsiveness of demand of a good or service to a change in price of another good or service. |
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| Measure of the responsiveness of the demand for a good or service after a change in income. |
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| As Income increases, demand increases. |
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| As income increases, demand decreases |
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| Price Elasticity of Supply |
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Definition
| Measure of the responsiveness of supply when there is a change in price. |
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Definition
| Tax on expenditure. Added to the selling price of a good or service. |
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Term
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Definition
| Indirect tax where there is a specific amount added to the price e.g. $1 |
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Definition
| Indirect tax where a percentage is added to the selling price. i.e. 20% |
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Definition
| Amount of money paid by the government to a firm, per unit of output. |
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| Costs that do not change with the level out output |
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| Costs that vary with level of output. |
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| Fixed costs + Variable costs |
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Term
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Definition
| Cost to produce one unit. Total cost/quantity produced |
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Term
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Definition
| the Additional cost of producing one more unit. |
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| A period in time in which there is at least one fixed factor of production. |
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| Period of time in which there are no fixed factors. |
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Definition
| That have a fall in long run average costs that come about as a result of a firm increasing its scale of production. |
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Definition
| Increase in the long run average costs that come as a result of expanding its scale of production. |
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Definition
| A market in which there is only one firm in the industry. May or may not have barriers to entry. |
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| Obstacles in the way of newcomers to a market such as economies of scale, product differentiation or legal protection. |
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| Market in which there only enough economies of scale available to support one firm. |
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| Market where new entrants face costs similar to those of established firms and wehre, on leaving, firms are able to get back their captial costs. |
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| Where a producer charges different prices to different customers for the idential good or service. |
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| Failure of markets to produce at the point where community curplus (consumer surplus + producer surplus) is maximised. |
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| Development needed to meet the needs of the present generation without compromising the ability of future generations to meet their own needs. |
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| Goods that would not be provided by the free market. They are non-rival and non-diminishing. |
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| Goods or services that are considered beneficial to people. Undersupplied in free market. |
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| Goods that are considered harmful to people. Would be oversupplied in a free market. |
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| Permits issued by governments to firms to pollute. Sets a maximum amount of pollution allowable. |
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Definition
| Aggregate revenue gained by a firm from the sale of a particular quantity of output. |
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| Total revenue dived by number of units sold. Price = Average Revenue. |
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| The extra revenue from selling one more unit. |
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| Amount of revenue necessary to cover total costs of production. |
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| Level of profits that exceeds what is necessary to ensure that a firm can continue to supply a good or service. |
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Definition
| The price where average revenue is equal to average variable cost. Below this price, a firm will shut down in the long term. |
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Definition
| Marginal Cost = Average Revenue |
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Term
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Definition
| Average Total Cost is at lowest value. |
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Definition
| Very large number of small firms producing identical products. Incapable of affecting the market supply curve. No barriers to Entry. Perfect knowledge of the marke.t |
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Definition
| Many buyers and sellers producing differentiated products with no barriers to entry and exit. |
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Definition
| Ways in which suppliers attempt to make their product different to that of their competitiors. |
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| Market structure where there are a few large firms that dominate a market. |
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| Few firms act together to avoid competition by resorting to agreements to fix prices or output. |
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| Oligopoly where firms decide not to act together and fix prices or output. Competition is normally non-price. |
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Definition
| A group of firms in an industry that join together to fix prices or output. Illegal. |
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Definition
| Occurs when previously unemployed factors of production are brought into use. Movement from a point within the PPC to a point nearer to the PPC. |
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Definition
| Possible prdouction that would be possible in an economy if all available factors of production were employed. |
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Definition
| Quantity/quality of factors of production in an economy is increased. Leads to a shift in teh PPC. |
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Definition
| Growth of real ouput in an economy over time. Measured as increase in RGDP. |
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Definition
| Improvement in standard of living, reduction in poverty, improved health and education. |
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Definition
| Meands of production are privately held by individuals and firms. Demand and Supply main determinants. |
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Definition
| Means of production are collectively owned. State is main determinant. |
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Definition
| Economy in process of moving from a centrally planned economy to a free market economy. |
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Definition
| The total money value of all final goods and services produced in an economy in one year + plus income from abroad. |
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Definition
| GNP + Net Property income from abroad - depreciation (capital consumption) |
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Definition
| Total money value of all goods and services produced in an economy in one year, not adjusted for inflation. |
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Definition
| Total money value of all goods and services produced in an economy in one year, adjusted for inflation. |
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Definition
Index that brings together measurements of standards of living, reduction in poverty, improved healthcare, improved education, in order to measure relative development. |
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Definition
| Total spending in an economy consisting of consumption, investment, goernment expenditure and net exports. |
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Definition
| Spending by households on consumer goods and services over a specific period of time. |
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Definition
| Addition of capital stock to the economy or expenditure by firms on capital. |
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Definition
| Where total spending (aggregate demand) is greater that the full employment level of output. |
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Definition
| Where the total spending (AD) of an economy is less that the of the full employment level of output, causing deflation. |
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Term
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Definition
| Shows fluctuations in the level of economic activity over time and suggest that the changes are cyclical. Four Stages: Depression, recovery, boom, recession |
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Term
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Definition
| Government policy to influence the Aggregate demand of an economy, hence affecting the average price level and the real national output. |
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Definition
| Demand Side Policy. Government makes changes in spending and taxation in order to achieve economic goals relating to inflation and unemployment. |
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Term
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Definition
| Where a government makes changes in the money supply or interest rates to achieve economic goals relating to inflation or unemployment. |
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Definition
| Total amount of domestic goods and services supplied by businesses and government, including both consumer and captial goods. |
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| Short Run Aggregate Supply |
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Definition
| Varies with level of demand for goods and services and is shifted in changes of factors of production. |
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| Long Run Aggregate Supply |
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Definition
| Dependant on resources of the economy and can only be increased by improvements in quality/quantity of factors of production. |
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Term
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Definition
| Government policies designed to shift LRAS to the right, thus increasing potential output in an economy. |
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Term
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Definition
| Ratio of an induced change in the level of national income to an original change. |
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Definition
| Relationship between level of induced investment and the rate of change in national income. |
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Definition
| Government spends more than it recieves in revneue and needs to borrow money, forcing up interest rates and 'crowding' out private investment and private consumption. |
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Definition
| The number of people in the labour force who are without but are actively seeking for work. |
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Definition
| When number of jobs in economy equals to or is greater than number of people looking for work. |
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Definition
| When workers carrying out work they are over-qualified for or when workers are working part-time. |
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Definition
| Number of unemployed workers expressed as percentage of total workforce. |
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Definition
| Unemployment as a result of a change in the methods of production, making various positions redundant and an increase in unemployment. |
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Definition
| Unemployment as a result of people leaving a job and actively seeking for another. |
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Definition
| Sustained increase in the level prices and a fall in the value of money. |
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Definition
| inflation that is caused by increasing aggregate demand in an economy i.e. shift in aggregate demand to the right. |
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Definition
| Inflation that is caused by an increase in the costs of production in an economy i.e. a shift in the SRAS to the left. |
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Definition
| Persistent fall int eh average level of prices in an economy. |
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Definition
| Curve showing the inverse relationship between the rate of unemployment and the rate of inflation. Suggests a trade-off between inflation and unemployment. |
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| Natural Rate of Unemployment |
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Definition
| Rate of unemployment that is consistent with a stable rate of inflation. |
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Definition
| Taxation imposed on people's income or wealth. |
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Definition
| System of direct taxation where tax is levied at an increasing rate for successive bands of income. |
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Definition
| System of taxation in which tax is levied at a decreasing average rate as income rises. |
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Term
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Definition
| System of taxation in which tax is levied at a constant rate as income rises, for example 10% of each increment of income as income rises. |
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Definition
| Payment received for which no good or service is exchanged e.g. student grant or a pension. |
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Definition
| Curve showing possible relationship between income tax rates and teh total tax revenue recieved by the government. |
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Definition
| Curve showing what percentage of the population owns what percentage of the total income in the economy. The further the cruve is form the line of absolute equality, the more equal is the distribution of income |
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Definition
| A coefficent index that measures the ratio of the area between a Lorenz curve and the line of absolute equality to the totalare under the line of equality. The higher the figure, the more unequal is the distribution. |
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