Economics test 1

something is scarce when it’s both desirable and limited

as people do not have infinite incomes, they must make choices on what goods/services to purchase

what is given up to get something else (never expressed in monetary terms). “trade-off”

Land,Labour,Capital,Entrepreneurship

concerned with the facts what is actually happening

what should be done, contains subjective value judgement

The maximum quantity of both products that can be produced

usefulness/pleasure a consumer gets when consuming a product

benefit of consuming one more

goods that are healthy for us, gov wants us to consume more(fruits,veg), usually underprovided/underconsumed

products that are bad for us, gov wants us to consume less (alcohol,tobacco), usually overproduced/overconsumed

since recources in an economy are relatively scarce, there must be a way of rationing those recources and the goods/services that come from them

planned, free market, mixed

what/how/for whom to produce controlled by gov, all recources collectively owned

Prices used to ration goods/services. All production in private hands and demand/supply are left free to set wages/prices in economy. Works relatively efficient, with lesser surpluses/shortages, self righting system

demerit goods overprovided, recources used up to quickly, people burden unemployment, monopolies

miscalculation causes shortge/surplus, distorted incentives, govt dominance

simple two-sector model that can illustrate the interdependence that exists between key economic decision-making

when governments are able to spend more money than they earn in taxes by borrowing money

any place where transactions take place between buyers and sellers

product,factor, stock, internation

the quantity of a good or service that customers are both willing and able to buy at a given price, per period of time

as price of a product falls the quantity demanded of a product will usually increase, ceteris paribus

when price of a product falls, increase in ‘real income’

as price of one product falls, the product will be more attractive than competitor

various factors other than the price of the good or service that affect the demand for the product. This causes a leftwards or rightwards shifts in demand

products that customers tend to buy more of as their real income level increases. This includes both necessities and luxury goods and services.

products with a negative income elasticity of demand. In other words, the demand for such products tends to fall when consumers real incomes rise.

change in income, substitutes, complements, unrelated, taste/preferance, future price predictions

products that are jointly demanded; for example, torches and batteries, or printers and ink cartridges.

products that are in competitive demand because they can be used in place for each other; for example, butter and margarine, tea and coffee, or Honda and Toyota cars.

movement along a demand curve is caused by price changes only. A fall in price causes quantity demanded to expand while an increase in price causes quantity demanded to contract

rightwards shift of the entire demand curve for a product, caused by favourable changes in non-price factors that affect demand.

leftwards shift of the entire demand curve for a product, caused by unfavourable changes in non-price factors that affect demand.

occurs when there is a change in any non-price factor that affects the demand for a product. The entire demand curve shifts to the left if there are unfavourable changes affecting demand, and vice versa.

demand increases as price rises, gain more utility from consuming expensive products

a low-income, non-luxury product for which demand increases as the price increases and vice versa

consumer is rational, has perfect information, is very intelligent, is selfish ect

adding together the total demand you can create a demand curve for the total market

automatic, reflective

fast decisions that are essentially subcontious

slow decisions that are much more controlled

availability bias,anchoring bias, framing bias, social conformity, status quo, losses aversion bias, hyperbolic discounting

the availability of recent information/examples tend to over-influence people’s decision making, consumers are quite poor at assessing risk/probabilities

given a value, use that value as a reference point to influence future decision/choices

with many choices, consumers would prefer to do nothing and stick to what has always been done

consumers feel the losses far more than the gains

humans prefer smaller short-term gains than larger long-term ones

The theory that the decisions that we make are heavily influenced by the ways in which the choices are presented to us

suggests that the choice architecture offered to people can be carefully designed to gently encourage (nudge) the people to voluntarily choose the option that is better for them

the consumer’s right to choose, maintained by nudge theory