A level Microeconomics key terms

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Last updated: October 13, 2022

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Hint	Answer
An inefficeint distribution of goods and services in the free market	Market Failure
The change in satisfaction from consuming an extra unit	Marginal Utility
Effects that occur on a third party outside of a transaction	Externalities
A compulsory contribution to state revenue	Tax
When markets don't provide a good or service at all	Complete market failure
A fall in price increases the real purchasing power of consumers	Income effect
Shows the maximum amount that can be produced of two given goods	PPF
Objective statements that can be tested, amended or rejected by referring to available evidence	Positive Statements
The difference between the price you are willing to sell at and the price you actually sell at	Producer Surplus
Tax on consumption, paid by the final consumer	Indirect Tax
The inputs available to supply goods and services in an economy	Factors of Production
The responsiveness of supply to a change in price	Price Elasticity of Supply
Exists where goods have more than one use	Composite demand
The quantity that consumers are willing and able to buy at a given price in a given amount of time	Demand
Tax on all types of income. Paid directly by the payee	Direct Tax
Once provided, it's impossible to stop someone from using it without paying	Non-excludable
The cost of borrowing and reward for saving	Interest rate
Resources that are replaceable over time	Renewable resources
Once provided, people cannot reject it	Non-rejectable
The responsiveness of quantity demanded to a change in price	Price elasticity of demand
Goods or services that don't use up any factor inputs when supplied	Free goods
Eliminates excess within a market as it naturally moves towards the equilibrium price	Invisible hand theory
Government grants firms money in order to increase supply or lower price	Subsidies

Hint	Answer
When people have inaccurate or incomplete data and so make wrong choices and decisions	Information Failure
The cost or impact of a negative externality on the 3rd party	Social cost
Goods that participate to more than one cycle of consumption	Durables
Subjective statements, they carry valid judgements about what ought to be	Normative Statements
Consumers and firms react to price change, If prices rise, firms should produce more. If prices fall, consumers should consume more	Signalling
The demand for a factor of production used to produce a good or service	Derived demand
The price at which supply = demand	Equilibrium price
A percentage tax	Ad Valorem Tax
The responsiveness of quantity demanded to a change in income	Income elasticity of demand
The utlity decreases the more we use it	Diminishing Returns
One person using it does not reduce the amount avilable for others	Non-rivalry
Goods that improve efficiency and productive potential of an economy in the long run	Capital goods
When an economy focuses all of its energy on one industry	Specialisation
The cost of the next best alternative forgone	Opportunity Cost
The difference between the price you are willing to pay for a product and the price you paid for it	Consumer Surplus
The responsiveness of quantity demanded of good Y to a change in price of good X	Cross price elasticity of demand
Resources that are finite in supply	Non renewable resources
When changes in price lead to more or less being produced, so increasing or limiting the quantity demanded by buyers	Rationing
Typically goods that are provided by the government	Public goods
Quantity demanded for this good decreases when income increases	Inferior
The quantity demand for this good increases (Less than proportionally) when income increases	Normal
Set tax per unit	Specific Tax
When changes in price encourage buyers and sellers to change the quantity they buy and sell	Incentive