Micro Eco

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Economics

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The study of how the forces of supply and demand allocate scarce resources.

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Economic perspective

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The economic perspective emphasizes the allocation and distribution of resources in the organizational setting.

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Marginal analysis

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Marginalism refers to the use of marginal concepts in economic theory. Marginalism is associated with arguments concerning changes in the quantity used of a good or service, as opposed to some notion of the over-all significance of that class of good or service, or of some total quantity thereof.

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optimal decision rule

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Decision theory in economics, psychology, philosophy, mathematics, and statistics is concerned with identifying the values, uncertainties and other issues relevant in a given decision, its rationality, and the resulting optimal decision. It is closely related to the field of game theory as to interactions of agents with at least partially conflicting interests whose decisions affect each other.

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Marginal Benefit

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(marginal benefits) the extra benefits resulting, for instance, from the increased consumption of a commodity

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Marginal Cost

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The cost added by producing one extra item of a product

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overallocation

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MC>MB

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underallocation

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MB>MC

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optimal allocation of resources

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Equilibrium

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opportunity cost

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The loss of potential gain from other alternatives when one alternative is chosen
- idle cash balances represent an opportunity cost in terms of lost interest

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law of increasing opportunity costs

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The law of increasing opportunity cost is fundamental to the production and supply of goods. In general, as the economy increases the quantity supplied of a good, the opportunity cost increases. And if cost is higher, then sellers need a higher price, resulting in the law of supply.

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Positive economics

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Based on facts.

Study of economics concerned with "what is" and "what will happen" if a course of action is taken or not taken. In contrast, normative economics is concerned with "what should or ought to be."

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Normative economics

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Based on subjective ideas.

Study of economics that attempts to determine desirability (or undesirability) of different economic conditions, programs, or situations by asking, "what should or ought to be." In contrast, positive economics is concerned with "what is."

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Fallacy of composition

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The fallacy of composition arises when one infers that something is true of the whole from the fact that it is true of some part of the whole (or even of every proper part). For example: "This fragment of metal cannot be broken with a hammer, therefore the machine of which it is a part cannot be broken with a hammer." This is clearly fallacious, because many machines can be broken into their constituent parts without any of those parts being breakable.

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Policy economics

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Economic policy refers to the actions that governments take in the economic field. It covers the systems for setting interest rates and government budget as well as the labor market, national ownership, and many other areas of government interventions into the economy.

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Microeconomics

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Study of how the law of supply and demand allocate scarce resources.

The branch of economics that analyzes the market behavior of individual consumers and firms in an attempt to understand the decision-making process of firms and households. It is concerned with the interaction between individual buyers and sellers and the factors that influence the choices made by buyers and sellers. In particular, microeconomics focuses on patterns of supply and demand and the determination of price and output in individual markets (e.g. coffee industry).

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Macroeconomics

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The field of economics that studies the behavior of the aggregate economy. Macroeconomics examines economy-wide phenomena such as changes in unemployment, national income, rate of growth, gross domestic product, inflation and price levels.

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Allocative effficiency

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Allocative efficiency is a type of economic efficiency in which economy/producers produce only that type of goods and services which are more desirable in the society and also in high demand. According to the formula the point of allocative efficiency is a point where price is equal to Marginal cost (P=MC).[1][2]

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Movements vs. shifts

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The demand curve is a two-dimensional depiction of the relationship between price and quantity demanded. Movements along the curve occur only if there is a change in quantity demanded caused by a change in the good's own price. A shift in the demand curve, referred to as a change in demand, occurs only if a non-price determinant of demand changes. For example, if the price of a complement were to increase, the demand curve would shift leftward reflecting a decrease in demand. The shifted demand curve represents a new demand equation.

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Movement vs. shifts part 2

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Movement along a demand curve due to a change in the good's price results in a change in the quantity demanded, not a change in demand. A change in demand refers to a shift in the position of the demand curve in two-dimensional space resulting from a change in one of the other arguments of the demand function.