Economic Terminology #1
Resources will be allocated to those goods and services that consumers value most highly
Allocative Efficiency
The relative amount that one variable changes, given a change in another variable
Elasticity
The four factors of production contribute to creating this model.
Production Possibility Curve.
A farmer chooses to plant wheat.
Describe the opportunity cost.
The opportunity cost is planting a different crop, or an alternate use of the resources (land and farm equipment).
The ability for firms to develop and adapt to changes over time, this can occur in the form of new technologies and innovation.
Dynamic Efficiency
A sustained increase in the productive capacity of Australia over a specific period of time, usually one year.
Economic Growth
If you could make a list in your notebook detailing everything you would ever want, what core economic concept is not consider here.
Scarcity
This fundamental economic principle states that the price of a product is determined by the relationship between how much people are willing to buy and how much of the product is available.
Supply and demand
A excludable and rivalrous good.
Private Good
Is an international treaty which removes barriers to trade and facilitates stronger trade and commercial ties,
Free Trade Agreement
An indirect tax levied on a given imports entering the country
Tariff
A theoretical framework to conceive social situations among competing players and produce optimal decision-making of independent and competing actors in a strategic setting.
Game Theory
There are four main types of market structures, what is the economic measure used to assess the degree of concentration for these markets.
Herfindahl-Hirschman Index (HHI).
Common fishing grounds demonstrate this economic issue.
Tragedy of the commons.
Is a record of the value of all transactions of a country with the rest of the world over a period of time.
Balance of Payment (BoP)
Are cost advantages companies experience when production becomes efficient, as costs can be spread over a larger amount of goods.
Economies of Scale
Asymmetric information is an economic problem because one party can exploit their greater knowledge.
Explain how asymmetric information applies to a moral hazard.
Moral hazard is a situation in which one party to an agreement engages in risky behaviour or fails to act in good faith because it knows the other party bears the consequences of that behaviour. E.g. Insurance.
Provide the formula for calculating GDP
GDP = C + I + G + (X - M), where C is consumption, I is investment, G is government spending, X is exports, and M is imports.
A group of students is assigned a project that requires teamwork and collaboration. Within the group, there there are individuals who contribute minimally or do not participate actively in the project work. State the economic concept that applies here.
Free Rider Problem
The situation in an economy where the desires and needs of consumers control the output of producers.
Consumer sovereignty
The quantity of goods and services consumer per person as affected by per capita incomes and purchasing power
Material Living Standards
In 1815, David Ricardo published his ground breaking essay which discussed amongst many things, a key economic theory. Name this theory.
Comparative Cost Advantage
The extent and manner to which a government intervenes in the economic is determined by the values and economic priorities of those in the government. State the spectrum used by economists to determine countries degree of government intervention.
Economic System Spectrum
- Command and Control
- Pure Free Market Economy
Sometimes, there are positive externalities or benefits received by third parties that arise from the production and consumption of particular goods or services. State a good with a positive production externality.
E.g. if you pay for the cost of a vaccination against the flu or measles, there are wider benefits for the general community who also benefit, even though they have paid for this.
Is the record of money coming in and out of a country for goods, services, income flows, and current transfers.