Microeconomics Terms

Front 1

Market

Back 1

Place where buyers and sellers need to exchange goods and services.

Front 2

Quantity Demanded

Back 2

Has an inverse relationship with changes in the price of a particular good.

Front 3

Quantity Supplied

Back 3

Has a direct relationship with changes in the price of a particular good.

Front 4

Changes in Demand (Supply)

Back 4

Shift in demand (supply) due to non price factors

Front 5

Normal Goods

Back 5

Goods whose consumption increases as income increases.

Front 6

Inferior Goods

Back 6

Good whose consumption decreases as income increases.

Front 7

Giffen Goods

Back 7

Good for which there is an upward-sloping demand curve (theoretical)

Front 8

Ceteris Paribus

Back 8

Holding all other factors or conditions constant.

Front 9

Price Elasticity of Demand Formula

Back 9

% Change in Quantity Demanded/% Change in Price

Front 10

Cross Price Elasticity of Demand

Back 10

%Change in Quantity Demanded of Product Y/ %Change in Price of Product X

Front 11

Income Elasticity of Demand

Back 11

%Change in Consumption of a Good/ %Change in Consumer Income

Front 12

Price Elasticity of Supply

Back 12

%Change in Quantity Supplied/ %Change in Price

Front 13

Utility-Maximizing Rule

Back 13

Front 14

Total Utility

Back 14

The total satisfaction a consumer receives from the consumption of a good or service.

Front 15

Diminishing Marginal Utility

Back 15

At some point in the consumption pattern of a good, each additional unit consumed yields less addition satisfaction (utility)

Front 16

Income Effect

Back 16

As the price of a particular good decreases, a consumer can afford more of it and other goods.

Front 17

Substitution Effect

Back 17

As the price of a particular good decreases, a consumer may buy more of this good relative to the price of a substitute good.

Front 18

Consumer Surplus

Back 18

The difference between the utility gained and the price paid by the consumer. The utility gained would measure the value of the product to the consumer. The price paid by the consumer would be the market price.

Front 19

Pure Private Good

Back 19

A good that has exclusion and distributive characteristics.

Front 20

Technological Efficiency

Back 20

The identification of those inputs that have the greatest effect on output per dollar of input expenditure.

Front 21

Pareto Efficiency

Back 21

The optimal point for society when any further improvement for some comes at the expense of others.

Front 22

Pure Public Good

Back 22

Goods which have non exclusion and non distributive characteristics.

Front 23

Quasi-Public Goods

Back 23

Goods which have some limited private good characteristics such as congestible public goods and price excludable public goods.

Front 24

Law of Diminishing Marginal Productivity

Back 24

The range of output over which smaller and smaller additional units of output are produced as successive equal increments of a variable input are added to fixed quantities of other inputs in the short run.

Front 25

Economies of Scale

Back 25

Savings per unit costs of productive as output increases.

Front 26

Economic Profits

Back 26

Income or revenue minus explicit and implicit costs.

Front 27

Accounting Profits

Back 27

Income or revenue minus explicit costs.

Front 28

List the Determinants of Demand

Back 28

- Consumer tastes and preferences

- Related goods' prices

- Income of consumers

- Number of buyers in the market

- Expectations for future price

Front 29

List the Determinants of Supply

Back 29

- Resource cost

- Other goods prices

- Technology

- Taxes and Subsidies

- Expectations of future prices

- Number of producers

Front 30

Profit Maximizing Criterion

Back 30

The level of output at which marginal revenue (MR) equals marginal cost (MC).

Front 31

Herfindahl Index

Back 31

The sum of the squares of market shares of firms in a particular market or industry; used to measure the level of concentrated power of firms in an industry.

Front 32

Natural Monopolies

Back 32

These are monopolies for which competition would prevent the benefits of economies of scale.

Front 33

Monopolistic Competition

Back 33

This form market structure is characterized by many medium sized firms that need to innovate and differentiate their products in both price and nonprice competition.

Front 34

Oligopoly

Back 34

This form of market structure is characterized by relatively few sellers who act interdependently and/or collusively to be price makers. There are strong barriers to entry and exit.

Front 35

Inefficiency

Back 35

This is the expected outcome of monopolistic competition derived from underutilizing capacity.

Front 36

Derived Demand

Back 36

The demand for resources such as labor is derived from the product that the resource helps produce.

Front 37

Wage Elasticity of Demand

Back 37

The percentage change in quantity demanded of labor in response to a percentage change in the wage rate.

Front 38

Marginal Revenue Product (MRP)

Back 38

The addition of the firm's revenue as the result of an additional output for an additional unit of labor.

Front 39

Marginal Factor Cost

Back 39

The additional cost for each additional unit of labor hired.

Front 40

Marginal Physical Product (MPP)

Back 40

The additional output produced as one more unit of labor (resource) is added.

Front 41

Monopsony

Back 41

A market in which there is a single buyer of labour.

Front 42

Human Capital

Back 42

The investment in people that increases their future monetary and psychic income.

Front 43

Lorenz Curve

Back 43

A curve that measures the degree of income inequality as contrasted with income equality.

Front 44

Arbitrage

Back 44

The practice of buying a good in one market and selling it for a higher price in another market.