Microeconomics

Front 1

Incentives

Back 1

are rewards and penalties that motivate behavior.

Front 2

Opportunity Costs

Back 2

If you make lawnmowers and bikes will get you a greater revenue then you will make bikes.

Front 3

Inflation

Back 3

Is an increase in the general level of prices.

Front 4

Absolute advantage

Back 4

is the ability to produce the same good using fewer inputs than another producer.

Front 5

Production possibilities

Back 5

shows all the combinations of goods that a country can produce given its productivity and supply of inputs.

Front 6

Comparative advantage

Back 6

in producing goods for which it has the lowest opportunity cost

Front 7

A Demand curve

Back 7

is a function that shows the quantity demanded at different prices

Front 8

The Quantity demanded

Back 8

in the quantity that buyers are willing and able to buy at a particular price.

Front 9

Consumer surplus

Back 9

is the consumers gain from exchange, or the difference between the maximum price a consumer is willing to pay for a certain quantity and the market price.

Front 10

Total consumer surplus

Back 10

is measured by the area beneath the demand curve and above the price.

Front 11

A Normal good

Back 11

is a good for which demand increases when income increases.

Front 12

An Inferior good

Back 12

is a good for which demand decreases when income increases.

Front 13

Complements

Back 13

a decrease in the price of one good leads to an increase in the demand for the other good.

Front 14

Substitutes

Back 14

a decrease in the price of one good leads to the decrease in demand for the other good.

Front 15

Supply curve

Back 15

is a function that shows the quantity supplied at different prices.

Front 16

Quantity supplied

Back 16

is the amount of a good that sellers are willing and able to sell at a particular price.

Front 17

Producer surplus

Back 17

is the producers gain from exchange, or the difference between the market price and the minimum price at which a producer would be willing to sell a particular quantity.

Front 18

Total producer surplus

Back 18

is measured by the are above the supply curve and below the price.

Front 19

Surplus

Back 19

is a situation in which the quantity supplied is greater than the quantity demanded.

Front 20

Shortage

Back 20

is a situation in which the quantity demanded is greater than the quantity supplied.

Front 21

Equilibrium price

Back 21

is the price at which the quantity demanded is equal to the quantity supplied.

Front 22

Equilibrium quantity

Back 22

is the quantity at which the quantity demanded is equal to the quantity supplied.

Front 23

Elasticity of demand

Back 23

measures how responsive the quantity demanded is to a change in price; more responsive equals more elastic

Front 24

Elasticity of demand

Back 24

measures how responsive the quantity demanded is to a change in price.

Front 25

Elasticity of supply

Back 25

measures how responsive the quantity supplied is to change in price.

Front 26

The great economic problem

Back 26

is to arrange our limited resources to satisfy as many of our wants as possible.

Front 27

Speculation

Back 27

is the attempt to profit from future price change.

Front 28

Futures

Back 28

are standarized contracts to buy or sell specified quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future.

Front 29

A Prediction market

Back 29

is a speculation market designed so that prices can be interpreted as probabilities and used to make predictions.

Front 30

Price ceiling

Back 30

is a maximum price allowed by law

Front 31

Deadweight loss

Back 31

is the total of lost consumer and producer surplus when not all mutually profitable gains from trade are exploited; price ceilings create a deadweight loss

Front 32

Rent control

Back 32

is a price ceiling on rental housing

Front 33

Price floor

Back 33

is a minimum price allowed by law

Front 34

Long run

Back 34

is the time after all exit or entry has occured

Front 35

Short run

Back 35

is the period before exit or entry can occur

Front 36

Total revenue

Back 36

TR=PxQ

Front 37

Total cost

Back 37

is the cost of producing a given quantity of output

Front 38

Explicit cost

Back 38

is a cost that requires a money outlay

Front 39

Implicit cost

Back 39

is a cost that does not require an outlay of money

Front 40

Economic profit

Back 40

is total revenue minus total costs including implicit costs

Front 41

Accounting profit

Back 41

is total revenue minus explicit cost

Front 42

Fixed cost

Back 42

Does not vary

Front 43

Variable cost

Back 43

Does vary

Front 44

Zero profits

Back 44

P=AC, just covers everything.

Front 45

Sunk cost

Back 45

is a cost that once incurred can never be recovered.

Front 46

Increase cost industry

Back 46

is an industry in which industry costs increase with greater output.

Front 47

Constant cost industry

Back 47

is an industry in which industry costs do not change with greater output.

Front 48

Decreasing cost industry

Back 48

is an industry in which industry costs decrease with an increase in output.

Front 49

Market power

Back 49

is the power to raise price above marginal cost without fear that other firms will enter the market.

Front 50

Monopoly

Back 50

is a firm with market power.

Front 51

Economics of scale

Back 51

are advantages of large scale production that reduce average cost as quantity increases.

Front 52

A Natural monopoly

Back 52

is said to exist when a single firm can supply the entire market at a lower cost than two or more firms.

Front 53

Barriers of entry

Back 53

are factors that increase the cost to new firms of entering an industry