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57 Cards in this Set
- Front
- Back
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producer surplus |
the difference between what price producers are willing and able to supply a good for and what price they actually receive from consumers |
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consumer surplus |
the difference between the total amount consumers are willing and able to pay for a good or service |
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Microeconomics |
the part of economics concerned with single factors and the effects of individual decisions |
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Macroeconomics |
the branch of economics concerned with large scale or general economic factors |
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total surplus |
total area of consumer surplus plus the total area of producer surplus |
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market efficiency |
producing the goods that a society needs at the lowest possible cost |
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market failure |
when resources are not allocated properly and economic surplus is not maximised.
Market power, externalities, public goods and common property goods all market failure. |
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market power
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the ability of a firm to profitably raise the market price of a good or service over marginal cost |
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public goods |
a commodity or service that is provided without profit to all members of a society, either by the government or by a private individual or organization |
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externality |
the cost or benefit that affects a party who did not choose to incur that cost or benefit |
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common property resource |
a type of good consisting of a natural or human-made resource system whose size or characteristics makes it costly, but not impossible, to exclude potential beneficiaries from obtaining |
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Supply |
the total amount of a specific good or service that is available to consumers |
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Demand |
consumer's desire and willingness to pay a price for a specific good or service |
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economic problem |
A theory that scarcity exists in the sense that only finite and insufficient resources are available to satisfy the needs and desires of all human being |
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PPF |
a production–possibility frontier (PPF), sometimes called a production–possibility curve, production-possibility boundary or product transformation curve, is a graph representing production tradeoffs of an economy given fixed resources |
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opportunity cost |
in microeconomic theory, the opportunity cost of a choice is the value of the best alternative forgone where, given limited resources, a choice needs to be made between several mutually exclusive alternatives |
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monopoly |
the exclusive possession or control of the supply of or trade in a commodity or service |
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oligopoly |
a state of limited competition, in which a market is shared by a small number of producers or sellers |
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cartel |
when firms come together to act or collude instead of competing with each other. Includes price fixing and market sharing |
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collusion |
agreements between firms, price fixing or market sharing |
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merger |
two or more firms joining together to form one larger firm |
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price elasticity of demand |
the responsiveness of quantity demanded to changes in price |
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percentage change method |
Ed = percentage change in quantity/percentage change in price |
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amount change method |
(△Q/Q) / (△P/P) or △Q/Q * △P/P |
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Midpoint formula |
△Q/Ave Q * P ave/△P |
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resources |
labor, enterprise, capital, natural |
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natural resources |
rivers, dirt, forests, plants |
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labor |
physical and mental effort applied in the production of a good or service |
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enterprise |
the coordination of production by an entrepreneur |
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capital |
man made resources which assist human resources |
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PPF moving up means... |
improvement in production technology for X good |
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PPF moving out/to the right means... |
increase in the quantity of resources |
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economic good |
a good that can command a price when sold |
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private goods |
A private good is a product that must be purchased in order to be consumed, and whose consumption by one individual prevents another individual from consuming it. Economists refer to private goods as "rivalrous" and "excludable" |
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Two important functions of an economic system are... |
the allocation of resources and the distribution of income |
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the three fundamental questions are... |
1) what goods and services will be produced and in what quantity 2) how will goods and services be produced in terms of production technique and types of resource 3) for whom will the goods and services be produced |
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A market consists of... |
buyers (demand), sellers (supply) and something to exchange (good/service) |
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a competitive market consists of... |
a large number of buyers and sellers, firms are price takers, very similar products, easy entry to the market |
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non-competitive market consists of... |
a small number of firms, product differentiation, firms are price setters, entry to the market is restricted |
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non price factors that affect demand are... |
levels of disposable income, the price of related goods, tastes and preferences, expectations of consumers, demographic factors |
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non price factors affecting supply are... |
costs of production, prices of other goods, technology, expectations of producers |
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movements in a supply curve are caused by... |
changes in price... as the price increases, amount supplied increases, as price declines, quantity supplied decreases |
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shifts in the supply curve are caused by... |
caused by a factor other than the price of the good. To the right is an increase in supply, to the left is a decrease in supply |
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demand curve is shifted to the left when... |
demand decreases |
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demand curve is shifted to the right when... |
demand increases |
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> 1 (more than one) |
price is elastic |
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< 1 (less than one) |
price is inelastic |
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= 1 (equals one) |
price is unitary elastic |
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law of demand states that... |
The law of demand is a microeconomic law that states, all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease, and vice versa
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perfectly inelastic... |
coefficient is 0 and vertical demand curve |
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perfectly elastic... |
coefficient is infinity and horizontal demand curve |
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Inferior good |
as income increases, demand decreases |
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normal good (luxury/necessity) |
as income increases, demand increases |
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substitute good |
substitute goods are two goods that could be used for the same purpose. If the price of one good increases, then demand for the substitute is likely to rise |
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cross price elasticity of demand |
in economics, the cross elasticity of demand or cross-price elasticity of demand measures the responsiveness of the quantity demanded for a good to a change in the price of another good, ceteris paribus |
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income elasticity of demand |
in economics, income elasticity of demandmeasures the responsiveness of the quantity demanded for a good or service to a change in theincome of the people demanding the good, ceteris paribus |
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price elasticity of supply |
price elasticity of supply (PES or Es) is a measure used in economics to show the responsiveness, or elasticity, of the quantity supplied of a good or service to a change in its price |
