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U1 Terms and Diagram

Economic
Economic is the study of how society allocates its scarce resources in order to satisfy unlimited wants.
Scarcity
How to allocate limited resources to meet human being’s unlimited wants?
Scarcity arises as people have infinite want but there is only a finite amount of resources.
Factors of production (resources)→CELL
Four resources that allow an economy to produce goods and services, including CELL( capital, enterprise, land, labour)
Resources are the basic categories of input available for the production of goods and services.
-Capital
This refers to the human-made aids to production that can be used in the process of production.
-Enterprise
The factor that brings the other factors of production together to produce products. It organizes production and is willing
to take risks.
-Land
This refers to all the natural resources that can be used in the process of production.
-Labour
This refers to all the human input into the process of production, both mental and physical.
Renewable resources
Any natural resource (as wood or solar energy) that can be replenished naturally with the passage of time.
Non-renewable resource
non-renewable goods are the resources that once used will never be replenished.
Sustainable development
The development which meet the needs of the present without compromising the ability of future generations to meet
their own needs.
Opportunity cost
The cost of the best alternative forgone. Opportunity cost applies to personal, group and national decision-making.
PPF/PPC→Production possibility frontier/curve
It shows the maximum level of output than an economy can achieve when all factors of production are full employed.
The maximum combination output of 2 goods or services with full employment of factors of production.
Capital goods
They are any tangible assets used by one business to produce goods or services as an input for other businesses to
produce consumer goods.
Consumer goods
A consumer good is any good purchased for consumption and not used later for the production of another consumer
good.
Production
The process of creating goods and services in an economy.
Consumption
The process by which consumers satisfy their wants.
Positive statement
A statement which is factual and objective that is based on empirical or actual evidence.
Normative statement
A statement which is subjective and expresses as value judgment.
Specialization
This refers to the process by which individuals, firms, and economies concentrate on producing those goods and services
where they have an advantage over them.
Division of labour
This refer to a situation where a manufacturing process is split into a sequence of individual tasks.
Money
It’s anything that is generally acceptable as a means of payment.
Market economy 市场经济
Market economy is an economic system with minimum government intervention, while the allocation of resources is
determined by the market force.
Mixed economy 混合经济
Mixed economy is an economy system where the allocation of resources is partly determined by the market and partly by
the state.
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Planned economic 计划经济
Planned economy is an economy system where allocation of resources is determined by the government.
Market system 市场体系
Market system use the price mechanism to determine the allocation of resources, see market economy.
Market mechanism 市场机制
Market mechanism is where decisions on price and quantity are made on the basis of demand and supply alone.
Market 市场
Market is where buyers and sellers get together to trade
Demand 需求
Demand refers to the quantity of a product that consumers are willing and able to buy at different prices.
Demand curve 需求曲线
Demand curve is a curve that shows the relationship between prices and quantity demanded.
The law of demand 需求法则
The law of demand states that there is an inverse relationship between quantity demanded and the price of a good or
service, ceteris paribus. 满⾜感
exn 多
,

Diminishing marginal utility

e. 边际效⽤递减
Diminishing marginal utility refers to the phenomenon that each additional unit of gain leads to an ever-smaller increase in
。

subjective value.
Elasticity 弹性
Elasticity is a numerical measure of responsiveness of one variable following a change in another variable, ceteris paribus.
Elastic 有弹性的
Elastic means the relative change in one thing is greater than the relative change in something that causes it.
Inelastic 无弹性的
Inelastic means the relative change in one thing is smaller than the relative change in something that causes it.
Price Elasticity of Demand(PED)需求价格弹性
Price Elasticity of Demand (PED) is a numerical measure of the responsiveness of the quantity demanded to a change in
price of a product.
perfectly inelastic 完全无弹性
Perfectly inelastic refers to a situation where a change in one thing has no effect on another.
Perfectly elastic 完全弹性
Perfectly elastic means the responsiveness of one thing to a change of another is close to infinity.
Unitary elasticity 单元弹性
Unitary elasticity occurs when the change in price is relatively the same as the change in quantity demanded giving a
numerical value of 1.
Income Elasticity of Demand(YED）需求收入弹性
Income Elasticity of Demand (YED) is a numerical measure of the responsiveness of the quantity demanded following a
change in income.
Cross Elasticity of Demand(XED）需求交叉价格弹性
Cross Elasticity of Demand (XED) is a numerical measure of the responsiveness of the quantity demanded for one product
following a change in the price of another related product.
Derived demand 衍生需求
Derived demand is when the demand for an input is the result of or derived from the demand of another goods and
services.
Normal goods 正常品
Normal goods are ones whose demand increases as income increases.
Inferior goods 劣等品
Inferior goods are one whose demand decreases as income increases.
Substitutes 替代品
Substitutes are alternative goods and can satisfy the same want or need; such as Coca-cola and Pepsi.
Supply 供给
Supply refers to the quantity of a product that producers are willing and able to sell at different prices.
Complements 互补品
Complements are goods consumed together with another, such as DVD and DVD players.
Supply Curve 供给曲线
Supply curve is a curve shows the relationship between prices and quantity supplied.
The law of supply 供给法则
The law of supply states that there is a positive relationship between quantity supplied and the price of a good or service,
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 ceteris paribus.
Price Elasticity of Supply (PES）供给价格弹性
Price Elasticity of Supply (PES) is a numerical measure of the responsiveness of the quantity supplied to a change in the
price of the product.
Equilibrium 平衡
Equilibrium refers to a situation where demand equals to supply, and there is no tendency for change.
Price mechanism 价格机制
Price mechanism refers to the means of allocating resources in a market economy
Disequilibrium 不平衡
Disequilibrium refers to a situation where demand and supply are not equal.
Consumer surplus 消费者盈余
Consumer surplus refers to the difference between the values a consumer places on units consumed and the payment
needed to actuary purchase that product.
Producer Surplus 生产者剩余
Producer surplus refers to the difference between the price a producer is willing to accept and what is actually paid.
Direct tax 直接税
A tax imposed on the incomes of individuals and firms.
Indirect tax 间接税
Tax that is imposed on expenditure (consumption).
A tax levied on goods or services rather than on persons or organizations.
Subsidy 补贴
An amount of money paid by government to a producer.
Market failure 市场失灵
Where resources are inefficiently allocated due to imperfections in the working of the market mechanism where resources
are not follow consumer demand.
Marginal benefit 边际收益
The marginal benefit is the benefit received from consuming extra one unit of output
Marginal cost 边际成本
The marginal cost is the cost spent from producing extra one unit of output.
Externalities 外部效应
Where the actions of producers or consumers giver rise to side effects to third parties who are not involved in the action
sometimes referred to as spillover effects.
Private costs
Costs incurred by an individual (firm or consumer) who produces or consumes a good or service.
External costs
@
costs incurred and paid for by third parties not involved in the action.
Social costs
The total costs of an action
=private costs + external costs
Private benefits
Benefits that accrue to an individual(firm or consumer)who produces or consumes a good or service.
External benefits
Benefits that are received by third parties not involved in the action.
Social benefits
The total benefits of an action
=private benefits + external benefits
Negative externality 负的外部效应
Where the side effects have a negative impact and impose costs to third parties.
Positive externality 正的外部效应
Where the side effects have a positive impact and provide benefits to third parties.
Production externality 生产外部效应
An externality that to occur as a result of production activity which may be either positive or negative.
Consumption Externality 消费外部效应
An externality that occur as a result of consumption, which may be either positive or negative.
Asymmetric information 信息不对称
A situation in which some participants in a market have better information on about market conditions than others.
Free goods
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Free goods have zero opportunity cost since consumption is not limited by scarcity. They are naturally in abundant supply
and need no conscious effort to obtain them.
Private goods
Goods are excludable and rival.
Public goods
Goods are non-excludable and non-rival and for which it’s usually difficult to charge a direct price.
Free rider problem
when an individual cannot be excluded from consuming a good, and thus has no incentive to pay for its provision.
Merit goods
Merit goods are ones that have positive side effects when consumed. They are rivalry and excludable but if left to a free
market, would be likely to be under-produced and under-consumed. This could be regarded as a market imperfection.
Demerit goods
Demerit goods are ones that have adverse side effects when consumed. They are those products that are worse for the
individual consumer than the individual realizes.
Moral hazard 道德危机
The tendency for people who are insured or otherwise protected to take greater risks.
Speculation 投机
An economic agent buys or sells something in the expectation of a future price change in the hope of generating a profit.
Market Bubble 市场泡沫
A sustained rise in the price of financial assets where the value increases above the true value.
Government intervention 政府干预
Government intervention is designed to address market failures and so to create a more efficient allocation of resources.
-Taxation
-Subsidies
-Maximum and minimum prices
-Tradeable pollution permits
-State provision of public goods
-Regulation
-Provision of information
-Extension of property rights
Indirect tax 间接税
a tax levied on goods or services rather than on persons or organizations.
PS. Government’s objectives of increasing Tax revenue and reduce market failure may conflict with each other.
Specific Tax 从量 平行线
Ad valorem Tax 从价 开口放大
Subsidy 补贴
Cash grant from government
Maximum price control 最高价格调控
Maximum price controls or price ceilings are only valid in markets where the maximum price imposed is below the
normal equilibrium price as determined in a free market.
Governments use legislation to enforce maximum prices for setting a lower price of products that satisfy people’s basic
need.
Minimum price 最低价格
Minimum price controls or price floors are only valid in markets where the minimum price imposed is above the normal
equilibrium price as determined in a free market.
Regulation 法规
Government imposes rules regarding the production, sale or use of a good.
Tradable pollution permits 污染许可
Government issues or sells permits (usually in a form of license) to firms allowing them to pollute up to a certain limit.
The provision of public good 公共商品提供
The government could provide public goods which are under provided in the free market, such as education and
healthcare. These have external benefits.
Provision of information 信息提供
Government can provide information to solve information failure problems.
Government failure 政府失灵
Government failure exists when the government intervenes to correct a market failure but the result is a more inefficient
allocation of resources and there is a net welfare loss.
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Distortions of prices signal in markets 市场价格扭曲
Government subsidies could distort price signals by distorting the free market mechanism.
Unintended consequences 意料外的结果
Government intervention tries to solve one problem but another problem create.
Excessive administrative costs 过高的推行费用
The social benefits of policy might not be worth the financial cost of administering the policy. It might cost more than the
government anticipated
Information Gaps 信息差
Government can suffer from the lack of knowledge about how to intervene.
Conflicting Objectives 目标冲突
Government want to achieve a goal but it is conflict with another goal.
Politicians maximizing their own welfare 政治家利益
Politicians act in a way that maximizes their own utility whether or not this leads to improved welfare for the citizens they
are supposed to represent.