NSSCO Economics (6145) flashcards
NSSCO Economics (6145) · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Opportunity cost
- The value of the next best alternative forgone when a resource is used for one purpose rather than another. It is the true cost of any economic choice.
- Production possibility curve
- A curve showing the maximum combinations of two goods an economy can produce with all its resources fully and efficiently employed, given constant technology.
- Public good
- A good that is non-excludable and non-rival in consumption, such as national defence or street lighting, so private markets tend to under-provide it.
- Mixed economy
- An economic system where resources are allocated partly through private markets and partly through government ownership, regulation and provision of goods and services.
- Law of demand
- The principle that, other things being equal, quantity demanded of a good falls as its price rises, producing a downward-sloping demand curve.
- Market equilibrium
- The price and quantity at which quantity demanded equals quantity supplied, so there is no tendency for price to change unless demand or supply shifts.
- Inferior good
- A good for which demand falls when consumer income rises, because consumers switch to preferred substitutes as they become more affordable.
- Price ceiling
- A maximum price set by government below the equilibrium price, which creates excess demand, shortages and possibly rationing or black markets.
- Price elasticity of demand
- The percentage change in quantity demanded divided by the percentage change in price; it measures how responsive demand is to a price change.
- Cross elasticity of demand
- The percentage change in quantity demanded of one good divided by the percentage change in price of another; positive for substitutes, negative for complements.
- Income elasticity of demand
- The percentage change in quantity demanded divided by the percentage change in income; positive for normal goods and negative for inferior goods.
- Tax incidence
- The division of a tax burden between buyers and sellers, which depends on relative elasticities; the less elastic side bears the larger share.
- Law of diminishing returns
- The principle that adding more of a variable input to a fixed input eventually reduces the marginal product of the variable input in the short run.
- Fixed cost
- A cost that does not change with the level of output in the short run, such as rent or insurance, and is incurred even when output is zero.
- Normal profit
- The minimum return needed to keep an entrepreneur in an industry; it is treated as part of total cost, so economic profit is zero.
- Economies of scale
- Reductions in long-run average cost as a firm expands output, arising from technical, managerial, financial and marketing advantages of larger scale.
- Perfect competition
- A market with many buyers and sellers, a homogeneous product, free entry and exit and perfect information, so each firm is a price taker.
- Monopoly
- A market with a single seller, no close substitutes and high barriers to entry, allowing the firm to act as a price maker.
- Oligopoly
- A market dominated by a few large firms whose decisions are interdependent, often leading to non-price competition or collusion.
- Barriers to entry
- Factors that prevent new firms from entering a market, such as patents, economies of scale, high capital costs and legal licences.
- Functions of money
- Money serves as a medium of exchange, a unit of account, a store of value and a standard for deferred payment in an economy.
- Credit multiplier
- The process by which commercial banks create deposits; total deposits equal the initial deposit multiplied by one divided by the reserve ratio.
- Central bank
- The institution that issues currency, acts as banker to government and commercial banks, manages reserves and conducts monetary policy.
- Gross domestic product
- The total market value of all final goods and services produced within a country's borders during a given period, usually one year.
- Real GDP
- Gross domestic product measured at constant base-year prices, which removes the effect of inflation and shows changes in actual output.
- Circular flow of income
- A model showing income and spending moving between households and firms, with injections of investment, government spending and exports and withdrawals of saving, tax and imports.
- Demand-pull inflation
- Inflation caused by aggregate demand rising faster than the economy's productive capacity, allowing firms to raise prices.
- Structural unemployment
- Unemployment caused by a mismatch between the skills or location of workers and the requirements of available jobs, often due to industrial change.
- Fiscal policy
- The use of government spending and taxation to influence aggregate demand, output, employment and the distribution of income.
- Comparative advantage
- The ability of a country to produce a good at a lower opportunity cost than another country, forming the basis for mutually beneficial trade.
- Balance of payments
- A systematic record of all economic transactions between a country's residents and the rest of the world over a given period.
- Currency depreciation
- A fall in the value of a currency against others under a floating system, making exports cheaper and imports more expensive in foreign currency terms.