Notesale: Turn your study into money

Document Preview

Extracts from the notes are below, to see the PDF you'll receive please use the links above

---

Year 1 Micro Definitions
Chapter 1:
Positive statement A statement of fact that can be scientifically tested to see if it is correct or
incorrect e
...
a fall in incomes will lead to a rise in demand for own-label
supermarket foods
...
g
...

(Words such as: ought, should, better or worse…) are usually used

Need

Something that is necessary for human survival, e
...
food, warmth, clothing,
shelter, etc…

Want

Something that is desirable, e
...
fashionable clothing, but is not necessary for
human survival
...


Production

A process/set of processes, that converts inputs into outputs of goods e
...

harvesting corn

Capital good

A good which is used in production of other goods or services (also known as
producer good), e
...
buildings, machines, furniture, etc…

Consumer good

A good which is consumed by individuals or households to satisfy their
needs/wants, e
...
vehicles
...
g
...


Finite resources

A resource which is scarce and runs out as it is used (also known as a nonrenewable resource), e
...
oil
...
g
...


Fundamental
How best to make decisions about allocation of scarce resources among
economic problem competing uses so as to improve and maximise human welfare and
happiness
...
People would like to consume more goods and
services than the economy can provides with limited resources
...


Production
possibility frontier

A curve depicting the various combinations of two products that can be
produced when all available resources are fully and efficiently employed
...


Full employment

When all who are able and willing to work are employed
...


Choice

Choosing between alternatives when making a decision on how to use scarce
resources
...
g
...
g
...
For a firm it occurs when the
average total cost of production is minimised
...


Chapter 2:
Competitive
market

A market in which the large number of buyers and sellers possess good market
information and can easily enter or leave the market
...


Supply

The quantity of a good or service that firms are willing and able to sell at given
prices in a given period of time
...


Effective demand

The desire for a good or service backed by an ability to pay

Market demand

The quantity of a good or service that all the consumers in a market are willing
and able to buy at different market prices
...


Increase in
demand

A rightward shift of the demand curve
...


Normal good

A good for which demand increases as income rises and demand decreases as
income falls
...


Elasticity

The proportionate responsiveness of a second variable to an intial change in
the first variable
...


Cross-elasticity of
demand

Measure the extent to which the demand for a good changes in response to a
change in the price of another good
...


Increase in supply A rightward shift of the supply curve
Decrease in
supply

A leftward shift of the supply curve

Price elasticity of
supply

Measures the extent to which the supply of a good changes in response to a
change in the price of that good

Equilibrium

A state of rest or balance between opposing forces

Market
equilibrium

A market is in equilibrium when planned demand equals planned supply and
the demand curve crosses rge supply curve
...


Disequilibrium

A situation in a market when there is excess supply or excess demand

Market
disequilibrium

Exists at any price other than the equilibrium price
...

Excess demand causes the price to rise and excess supply causes the price to
fall
...


Excess demand

When consumers wish to buy more than firms wish to sell, with the price
below the equilibrium price
...


Competing supply When raw materials are used to produce one good they cannot be used to
produce another good
Complementary
good

A good in joint demand, or a good in which is demanded at the same time as
the other good

Substitute good

A good in competing demand, namely a good which can be used in place of
the other good

Composite
demand

Demand for a good which has more than one use

Derived demand

Demand for a good which is an input into the production of another good

Allocative
efficiency

Occurs when the available economic resources are used to produce the
combination of goods and services that best matched people’s tastes and
preferences

Productive
efficiency

For the economy as a whole occurs when it is impossible to produce more
than one good without producing less of another
...


Merit good

A good which when consumed, leads to benefits which other people enjoy, or
a good for which the long-term benefit of consumption exceeds the shortterm benefit enjoyed by the person consuming the merit good
...

2
...

4
...
No barriers to enter or exit the market in the long run
6
...
When a country or firm has complete control of a natural resource
2
...


Natural barrier to A barrier to market entry which is not man-made, e
...
economies of scale
entry
Artificial barrier
to entry

A barrier to market entry which is man-made, e
...
patents

Informative
advertising

Provides consumers and producers with information about goods/services

Persuasive
advertising

Attempts to persuade customers that a good/service is worth buying

Saturation
advertising

Through flooding the market with information and persuasion about a firms
product, it forms a man-made barriers and so smaller firms cannot compete

Product
differentiation

Making a product different from other products through design

Quantity setter

When a firm chooses the quantity of a good to sell instead of price

Concentration
ratio

A ratio which indicates the total market share of a number of leading firms in a
market, or the output of these firms as a percentage of total market output

Oligopoly

A market dominated by a few firms

Resource
misallocation

When resources are allocated in a way which does not maximise economic
welfare

Collusion

Co-operation between firms
...


Invention

Creates new ideas for products or processes

Innovation

Converts the results of invention into marketable products or services

Price competition Reducing the price of a good or service to gain sales by making it more
attractive for consumers
Limit pricing

Reducing the price of a good to just above average cost to deter the entry of
new firms into the market
...
g

---