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Hint
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Answer
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When changes in price encourage buyers and sellers to change the quantity they buy and sell
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Incentive
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Total satisfaction from a given level of consumption
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Total Utility
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The quantity demand for this good increases (Less than proportionally) when income increases
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Normal
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The quantity that consumers are willing and able to buy at a given price in a given amount of time
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Demand
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The quantity of a good or service that producers are willing and able to offer for sale at each possible price in given time periods
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Supply
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The difference between the price you are willing to pay for a product and the price you paid for it
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Consumer Surplus
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Tax on consumption, paid by the final consumer
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Indirect Tax
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Eliminates excess within a market as it naturally moves towards the equilibrium price
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Invisible hand theory
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The responsiveness of quantity demanded of good Y to a change in price of good X
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Cross price elasticity of demand
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The inputs available to supply goods and services in an economy
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Factors of Production
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Goods that improve efficiency and productive potential of an economy in the long run
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Capital goods
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Set tax per unit
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Specific Tax
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Effects that occur on a third party outside of a transaction
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Externalities
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Exists where goods have more than one use
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Composite demand
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The responsiveness of quantity demanded to a change in income
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Income elasticity of demand
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Goods that participate to more than one cycle of consumption
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Durables
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Quantity demanded for this good decreases when income increases
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Inferior
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A fall in price increases the real purchasing power of consumers
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Income effect
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Subjective statements, they carry valid judgements about what ought to be
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Normative Statements
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The responsiveness of supply to a change in price
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Price Elasticity of Supply
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An inefficeint distribution of goods and services in the free market
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Market Failure
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The difference between the price you are willing to sell at and the price you actually sell at
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Producer Surplus
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When an economy focuses all of its energy on one industry
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Specialisation
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A compulsory contribution to state revenue
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Tax
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Consumers and firms react to price change, If prices rise, firms should produce more. If prices fall, consumers should consume more
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Signalling
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Tax on all types of income. Paid directly by the payee
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Direct Tax
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The price at which supply = demand
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Equilibrium price
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The cost of borrowing and reward for saving
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Interest rate
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When changes in price lead to more or less being produced, so increasing or limiting the quantity demanded by buyers
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Rationing
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The responsiveness of quantity demanded to a change in price
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Price elasticity of demand
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Once provided, people cannot reject it
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Non-rejectable
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Typically goods that are provided by the government
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Public goods
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Goods or services that don't use up any factor inputs when supplied
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Free goods
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Government grants firms money in order to increase supply or lower price
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Subsidies
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When people have inaccurate or incomplete data and so make wrong choices and decisions
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Information Failure
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Resources that are replaceable over time
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Renewable resources
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The utlity decreases the more we use it
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Diminishing Returns
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The demand for a factor of production used to produce a good or service
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Derived demand
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A percentage tax
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Ad Valorem Tax
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Objective statements that can be tested, amended or rejected by referring to available evidence
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Positive Statements
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One person using it does not reduce the amount avilable for others
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Non-rivalry
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When markets don't provide a good or service at all
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Complete market failure
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The cost or impact of a negative externality on the 3rd party
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Social cost
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Resources that are finite in supply
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Non renewable resources
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Once provided, it's impossible to stop someone from using it without paying
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Non-excludable
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The change in satisfaction from consuming an extra unit
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Marginal Utility
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