Principles of Microeconomics
Terms
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- comparative advantage
- the ability to produce a good at a lower opportunity cost than another producer
- equilibrium quantity
- the quantity supplied and the quantity demanded at the equilibrium price
- rational people
- people who systematically and purposefully do the best they can to achieve their objectives
- price elasticity of supply
- a measure of how much the quantity supplied of a good responds to a change in the price of that good, computed as the percentage change in quantity supplied divided by the percentage change in price
- shortage
- a situation in which quantity demanded is greater than quantity supplied
- externality
- the impact of one person's actions on the well-being of a bystander
- opportunity cost
- whatever must be given up to obtain some item
- economics
- the study of how society manages its scarce resources
- law of supply
- the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises
- supply schedule
- a table that shows the relationship between the price of a good and the quantity supplied
- marginal changes
- small incremental adjustments to a plan of action
- law of supply and demand
- the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance
- complements
- two goods for which an increase in the price of one leads to a decrease in the demand for the other
- supply curve
- a graph of the relationship between the price of a good and the quantity supplied
- demand schedule
- a table that shows the relationship between the price of a good and the quantity demanded
- imports
- goods produced abroad and sold domestically
- demand curve
- a graph of the relationship between the price of a good and the quantity demanded
- equilibrium price
- the price that balances quantity supplied and quantity demanded
- scarcity
- the limited nature of society's resources
- efficiency
- the property of society getting the most it can from its scarce resources
- absolute advantage
- the ability to produce a good using fewer inputs than another producer
- market failure
- a situation in which a market left on its own fails to allocate resources efficiently
- tax incidence
- the manner in which the burden of a tax is shared among participants in a market
- property rights
- the ability of an individual to own and exercise control over scarce resources
- total revenue
- the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold
- competitive market
- a market in which there are many buyers and many sellers so that each has a negligible impact on the market price
- quantity supplied
- the amount of a good that sellers are willing and able to sell
- price floor
- a legal minimum on the price at which a good can be sold
- exports
- goods produced domestically and sold abroad
- elasticity
- a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants
- income elasticity of demand
- a measure of how much the quantity demanded of a good responds to a change in consumers' income, computed as the percentage change in quantity demanded divided by the percentage change in income
- productivity
- the quantity of goods and services produced from each hour of a worker's time
- law of demand
- the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises
- inferior good
- a good for which, other things equal, an increase in income leads to a decrease in demand
- opportunity cost
- whatever must be given up to obtain some item
- inflation
- an increase in the overall level of prices in the economy
- equity
- the property of distributing economic prosperity fairly among the members of society
- incentive
- something that induces a person to act
- market
- a group of buyers and sellers of a particular good or service
- cross-price elasticity of demand
- a measure of how much the quantity demanded of one good responds to a change in the price of another good, computed as the percentage change in quantity demanded of the first good divided by the percentage change in the price of the second good
- price elasticity of demand
- a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price
- substitutes
- two goods for which an increase in the price of one leads to an increase in the demand for the other
- normal good
- a good for which, other things equal, an increase in income leads to an increase in demand
- market power
- the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices
- business cycle
- fluctuations in economic activity, such as employment and production
- surplus
- a situation in which quantity supplied is greater than quantity demanded
- equilibrium
- a situation in which the market price has reached the level at which quantity supplied equals quantity demanded
- price ceiling
- a legal maximum on the price at which a good can be sold
- market economy
- an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services