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Economics Key Terms
Terms in this set (42)
the value of a commodity set by the consumers by the demand od the product is equal to the cost of resources used in producing the commodity
total cost divided by the number of units of the product produced
average fixed costs
total fixed cost divided by the number of units per output
barriers to entry
factors making it difficult for new firms to enter a market
a formal agreement among firms
any agreement in a market between suppliers to avoid competition
a government policy directed at encouraging competition in the market
a market where no single firm has no dominant position and the consumer has a wide choice
the difference between how much the consumer is willing and able to pay for good and service and how they will actually pay
a market with no barriers of entry
the consumption of de-merit goods can lead to externalities which causes a fall in social welfare
diseconomies of scale
disadvantages to a firm, in the form of high-long run costs, from increasing the size of the operation
economy of scale
benefits, in terms of lower unit costs, from increasing the size of the operation
a charge made to the fimrs that pollute the environment, based on the quantity of pollution they emit
The property of a good whereby a person can be prevented from using it.
Costs that do not vary directly with the level of output e.g. rent and business rates.
Policies that when implemented, cause a deeper market failure. Intervention that causes new and more serious problems that didn't exist before.
For competitive markets to work efficiently consumers and producers must respond to price signals in the market.
When people have inaccurate, incomplete, uncertain or misunderstood data and so potentially make wrong choices.
Adam Smith described this as the market operated in a competitive market through the pursuit of self-interest to allocate resources in society's best interest.
Market failure exists when the competitive outcome of markets is not efficient from the point of view of the economy as a whole.
Where demand exceeds supply at a certain price.
A product that society values as everyone should have, regardless of whether an individual wants them.
A single seller of a product in a given industry m
Negative externalities occur when production and consumption impose external costs on third parties outside of the market. These social costs exceed private costs.
non price competition
Different companies in the same market not competition on the price of a product but other means such as quality.
polluter pays principle
The government may intervene with in a market to ensure firms and consumers include negative externalities in their decisions.
Positive externalities exist when third parties benefit from the spill-over effects of consumption.
Changes in price act as a signal about how resources should be allocated.
The rewards to individuals, firms or consumers from producing or consuming goods and services.
Costs of an economic activity to individuals and firms.
Products that are both rival and excludable.
The difference between what producers are willing and able to supply for a good and the price they actually receive.
When a business in a certain market reaches the lowest point of its average curve implying an efficient use of scarce resources and a high level of factor productivity.
Public bads include environmental damages and global warming which affects everyone
They are non-rival - consumption of the good by one person does not reduce the amount of available for consumption by another person.
Prices have signalling functions because the prices in a market send important information to producers and consumers.
The benefit of product or consumption of a product for society as a whole.
The cost of production or consumption of a product for society as a whole.
Payments to suppliers that reduce their costs, this should increase supply and reduce the market's equilibrium price.
Multiply the price with the number of units sold.
tragedy of the Commons
When no one owns, it gets over-used, e.g. fishing and deforestation
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