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Title: List of micro economic terms
Description: A complete list of all micro economic terms, mainly aimed at AS level where understanding the full definition of these terms are vital but also very useful for all economic courses.
Description: A complete list of all micro economic terms, mainly aimed at AS level where understanding the full definition of these terms are vital but also very useful for all economic courses.
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Term:
Definition
Allocative
occurs when the available economic resources are used to produce the combination of goods and services that best matches
efficiency
people's tastes and preferences
...
Artificial barrier to
entry
Average cost
Topic area
Mich HW
4
...
1
...
total cost of production divided by output
...
Capital good
a good which is used in the production of other goods or services
...
4
...
1
...
Choice
Collusion
Competing supply
choosing between alternatives when making a decision on how to use scarce resources
...
1
...
5
co-operation between firms, for example to fix prices
...
when raw materials are used to produce one good they cannot be used to produce another good
...
A competitive market is one in which firms strive to outdo their rivals, but it does not necessarily meet all the
4
...
3
...
1
...
2
X
conditions of perfect competition
...
Composite demand
Concentrated
market
Concentration ratio
Condition of
demand
demand for a good which has more than one use
...
a ratio which indicates the total market share of a number of leading firms in a market, or the ouput of these firms as a
percentage of the total market output
...
4
...
3
...
4
...
3
...
through exercising their spending power, consumers collectively determine what is produced in a market
...
1
...
3
sovereignty
Consumption
sovereignty is strongest in a perfectly competitive market
...
Cross-elasticity of
measures the extent to which the demand for a good changes in response to a change in the price of another good; it is
demand
calculated by dividing the percentage change in quantity demanded by the percentage change in the price of another good
...
1
...
2
Decrease in demand a leftward shift of the demand curve
...
1
...
1
Decrease in supply
X
4
...
3
...
the quantity of a good or service that consumers are willing and able to buy at given prices in a given period of time
...
4
...
3
...
Value judgements are involved
X
X
in deciding that a good is a demerit good
...
X
Diseconomy of scale as output increases, long-run average cost rises
...
X
the way in which income and wealth are divided among the population
...
Different workers perform different tasks in the course of producing a
good or service
...
the economic well-being of an individual, a group within society, or an economy
...
4
...
1
...
1
...
2
Term:
Definition
Topic area
Mich HW
Effective demand
the desire for a good or service backed by an ability to pay
...
1
...
1
X
Elasticity
the proportionate responsiveness of a second variable to an intial proportionate change in the first variable
...
1
...
2
X
Entry barrier
Equilibrium
makes it difficult or impossible for new firms to enter a market
...
Equilibrium price
the price at which planned demand for a good or service exactly equals planned supply
...
Excess demand
when consumers wish to buy more than firms wish to sell, with the price below the equilibrium price
...
X
Exchange
Exit barrier
External economy
to give something in return for something else received
...
makes it difficult or impossible for firms to leave a market
...
a public good, in the cast of an external benefit, or a public bad, in the case of an external cost, that is 'dumped' on third
X
parties outside the market
...
4
...
1
...
Also known as a non-renewable resource
...
when all who are able and willing to work are employed
...
1
...
3
Fundamental
how best to make decisions about the allocation of scarce resources among competing uses so as to improve and maximise
economic problem
human happiness and welfare
...
1
...
5
occurs when workers find it difficult or impossible to move to jobs in other parts of the country or in other countries for
4
...
1
...
Government failure
Immobility of
labour
Imperfect
competition
occurs when government intervention reduces economic welfare, leading to an allocation of scarce resources that is worse
than the free-market outcome
...
g
...
g
...
any market structure lying between the extremes of perfect competition and pure monopoly
...
Income elasticity
measures the extent to which the demand for a good changes in response to a change in income; it is calculated by dividing
of demand
the percentage change in quantity demanded by the percentage change in income
...
1
...
2
Increase in demand rightward shift of the demand curve
...
1
...
1
Increase in supply
rightward shift of the supply curve
...
1
...
3
Inequity
unfairness or unjustness
...
Information
occurs when people make wrong decisions because they don't possess or they ignore relevant information
...
advertising
Innovation
Internal economy
of scale
Invention
Joint supply
Long run
Long-run average
cost
X
provides consumers and producers with useful information about goods or services
...
cost saving resulting from the growth of the firm itself
...
when one good is produced, another good is also produced from the same raw materials
...
Limit pricing
4
...
3
...
Prices are set at
levels which are likely to make it unprofitable for potential entrants who might consider coming into the market
...
long-run total cost divided by output
...
1
...
0
X
Long-run production occurs when a firm changes the scale of all the factors of production
...
Market
exists at any price other than the equililbrium price
...
Market equilibrium when planned demand equals planned supply in the market
...
occurs when a firm maximises its percentage share of the market in which it sells its product
...
Market supply
the quantity of a good or service that all firms plan to sell at given prices in a given period of time
...
Value
4
...
3
...
Missing market
a situation in which there is no market because the functions of prices have broken down
...
entry
Natural monopoly
X
a barrier to market entry which is not man-made
...
something that is necessary for human survival, such as food, clothing, warmth or shelter
...
Normal good
a good for which demand increases as income rises and demand decreases as income falls
...
1
...
2
X
a statement that includes a value judgement and cannot be refuted just by looking at the evidence
...
1
...
1
X
4
...
1
...
1
...
1
X
measures the extent to which the demand for a good changes in response to a change in the price of that good
...
1
...
2
X
measures the extent to which the supply of a good changes in response to a change in the price of that good
...
1
...
4
Normative
statement
Occupational
4
...
1
...
Oligopoly
a market dominated by a few firms
...
Patent
a strategic or man-made barrier to market entry caused by government legislation protecting the right of a firm to be the
sole producer of a patented good, unless the firm grants royalties for other firms to produce the good
...
Persuasive
attempts to persuade potential customers that a good or service possesses desirable characteristics that make it worth
advertising
buying
...
a statement of fact that can be scientifically tested to see if it is correct or incorrect
...
a price above which it is illegal to trade
...
reducing the price of a good or service to gain sales by making it more attractive for consumers
...
Price floors, or minimum legal prices, can distort markets by creating excess
supply
...
a firm which passively accepts the ruling market price set by market conditions outside its control
...
producers or firms in a market determine what is produced and what prices are charged
...
Term:
Definition
Production
a process, or set of processes, that converts inputs into output of goods
...
1
...
3
X
4
...
1
...
a curve depicting the various combinations of two products (or types of products) that can be produced when all the
possibility frontier available resources are fully and efficiently employed
...
For
efficiency
Productivity gap
Productivity
Profit
a firm this occurs when the average total cost of production is minimised
...
output per unit of input
...
4
...
1
...
Public good
a good, such as a radio programme, that is non-excludable and non-rival
...
a firm chooses the quantity of a good to sell, rather than its price
...
a good which is not fully non-rival and/or where it is possible to exclude people from consuming the product
...
X
involves the imposition of rules, controls and constraints, which restrict freedom of economic action in the market place
...
4
...
1
...
g
...
1
...
5
and defense
...
X
Sales maximisation occurs when sales revenue is maximised
...
Scarcity
Short run
Short-run
production
Signalling function
of prices
Social benefit
Social cost
Specialisation
Subsidy
results from the fact that people have unlimited wants but resources to meet these wants are limited
...
4
...
1
...
occurs when a firm adds variable factors of production to fixed factors of production
...
X
the total benefit of an activity, including the external benefit as well as the private benefit
...
the total cost of an activity, including the external cost as well as the private cost
...
a worker only performing one task or a narrow range of tasks
...
a payment made by government or another authority, usually to producers, for each unit of the subsidised good that they
produce
...
Substitute good
a good in competing demand, namely a good which can be used in the place of the other good
...
1
...
2
Supply
the quantity of a good or service that firms are willing and able to sell at given prices and in a given period of time
...
1
...
3
Tax
a compulsory levy imposed by the government to pay for its activities
...
a cost saving generated through changes to the 'productive process' as the scale of production and the level of output
of scale
Total cost
Total revenue
Trade
Unemployment
Variable cost
Want
increase
...
the money a firm receives from selling its output, calculated by multiplying the price by the quantity sold
...
when not all of those who are able and willing to work are employed
...
something that is desirable, such as fashionable clothing, but is not necessary for human survival
...
1
...
5
4
...
1
Title: List of micro economic terms
Description: A complete list of all micro economic terms, mainly aimed at AS level where understanding the full definition of these terms are vital but also very useful for all economic courses.
Description: A complete list of all micro economic terms, mainly aimed at AS level where understanding the full definition of these terms are vital but also very useful for all economic courses.