Podcast
Questions and Answers
What is a characteristic of a perfectly competitive market structure?
What is a characteristic of a perfectly competitive market structure?
What is an example of a positive externality?
What is an example of a positive externality?
What is the primary purpose of taxation in the context of externalities?
What is the primary purpose of taxation in the context of externalities?
What is a characteristic of public goods?
What is a characteristic of public goods?
Signup and view all the answers
What is the purpose of subsidies in the context of merit goods?
What is the purpose of subsidies in the context of merit goods?
Signup and view all the answers
What is the fundamental economic problem that microeconomics seeks to address?
What is the fundamental economic problem that microeconomics seeks to address?
Signup and view all the answers
What is the term for the value of the next best alternative forgone when making a choice?
What is the term for the value of the next best alternative forgone when making a choice?
Signup and view all the answers
In a market economy, how are resources allocated?
In a market economy, how are resources allocated?
Signup and view all the answers
What is the point at which the marginal utility of a good equals its price?
What is the point at which the marginal utility of a good equals its price?
Signup and view all the answers
What is the term for the process of transforming inputs into outputs?
What is the term for the process of transforming inputs into outputs?
Signup and view all the answers
What is the characteristic of a market that includes the number of firms, barriers to entry, and product differentiation?
What is the characteristic of a market that includes the number of firms, barriers to entry, and product differentiation?
Signup and view all the answers
Study Notes
Microeconomics
Definition
Microeconomics is the study of individual economic units such as households, firms, and markets.
Key Concepts
- Scarcity: The fundamental economic problem of unlimited wants and needs, but limited resources.
- Opportunity Cost: The value of the next best alternative forgone when making a choice.
- Economic Efficiency: The optimal allocation of resources to maximize satisfaction.
Economic Systems
- Market Economy: A system where resources are allocated based on market forces of supply and demand.
- Command Economy: A system where resources are allocated by the government.
Consumer Behavior
- Demand: The quantity of a good or service that consumers are willing and able to buy at a given price.
- Law of Demand: As the price of a good increases, the quantity demanded decreases, ceteris paribus.
- Consumer Equilibrium: The point at which the marginal utility of a good equals its price.
Firm Behavior
- Production: The process of transforming inputs into outputs.
- Cost Minimization: Firms aim to minimize costs to maximize profits.
- Profit Maximization: Firms aim to maximize profits by producing at the level where marginal revenue equals marginal cost.
Theme 1: Markets and Market Failure (Edexcel A Level Economics)
Markets
- Market Structure: The characteristics of a market, including the number of firms, barriers to entry, and product differentiation.
- Perfect Competition: A market structure where there are many firms, free entry and exit, and identical products.
Market Failure
- Externalities: The unintended consequences of economic activity that affect third parties.
- Positive Externality: A benefit that affects third parties, e.g. education.
- Negative Externality: A cost that affects third parties, e.g. pollution.
- Public Goods: Goods and services that are non-rivalrous and non-excludable, e.g. national defense.
- Merit Goods: Goods and services that are deemed desirable by the government, e.g. healthcare.
Government Intervention
- Market Failure: The government may intervene to correct market failures, e.g. regulating pollution.
- Taxation: A way to internalize externalities, e.g. carbon tax.
- Subsidies: A way to encourage the production of merit goods, e.g. education subsidies.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your understanding of microeconomics, including scarcity, opportunity cost, and economic efficiency, as well as markets, market failure, and government intervention. This quiz covers key concepts and terms for Edexcel A Level Economics.
