PMT Theme 1

Created by

Toby Landes (GRK7)

Cards (84)

What is an ad valorem tax?
An indirect tax based on the value of a good
How does asymmetric information lead to market failure?
It occurs when one party has more information than the other
What is capital in economics?
Goods used in the production process
What are capital goods?
Goods produced to aid the production of consumer goods in the future
What does ceteris paribus mean?
All other things remaining the same
What is a command economy?
An economy where the state allocates all factors of production
What are complementary goods?
Goods with negative cross elasticity of demand
What are consumer goods?
Goods bought and demanded by households and individuals
What is consumer surplus?
The difference between what consumers are willing to pay and what they actually pay
What is cross elasticity of demand (XED)?
The responsiveness of demand for one good to a change in the price of another good
What is demand in economics?
The quantity of a good/service that consumers are willing to buy at a given price
What does diminishing marginal utility explain?
The extra benefit from consuming additional units of a good declines
What is division of labour?
Specialization of labor during the production process
What is the economic problem?
The problem of scarcity where wants are unlimited but resources are finite
What does efficiency mean in economics?
Optimal allocation of resources with minimal waste
What is enterprise in the context of production factors?
The willingness and ability to take risks and combine other factors of production
What is equilibrium price/quantity?
Where demand equals supply with no market forces causing change
What is excess demand?
When price is set too low, leading to demand greater than supply
What is excess supply?
When price is set too high, leading to supply greater than demand
What are externalities?
The costs or benefits a third party receives from an economic transaction
What are external costs/benefits?
The costs/benefits to a third party not involved in the economic activity
What is a free market?
An economy where the market mechanism allocates resources
What is the free rider principle?
People who do not pay for a public good still receive benefits from it
What is government failure?
When government intervention leads to a net welfare loss in society
What is habitual behaviour in economics?
A cause of irrational behaviour due to consumer habits
What is the incidence of tax?
The tax burden on the taxpayer
What is income elasticity of demand (YED)?
The responsiveness of demand to a change in income
What is an indirect tax?
Taxes levied on goods and services that increase production costs
What are inferior goods?
Goods that see a fall in demand as income increases
What are information gaps?
When an economic agent lacks the information needed to make a rational decision
What is labour in economics?
One of the four factors of production; human capital
What is land in the context of production factors?
Natural resources such as oil, coal, and wheat
What are luxury goods?
Goods for which demand increases more than proportionately as income rises
What is market failure?
When the free market fails to allocate resources efficiently
What are market forces?
Forces that act to reduce prices when there is excess supply
What is a minimum price?
A floor price that a firm cannot charge below
What is a mixed economy?
An economy where both the free market and government allocate resources
What is a model in economics?
A hypothesis that can be tested by evidence
What are negative externalities of production?
When social costs of producing a good exceed private costs
What is non-excludability?
A characteristic of public goods where one cannot be prevented from using it