Term

Excess Capacity Scarcity Economics Market

Opportunity Cost

Ceteribus Paribus Economic Growth Productivity Demand Law of Demand Marginal Benefit Normal Goods Inferior Goods Substitute Goods Complementary Goods Supply Supply Substitute Equilibrium Consumer Surplus Producer Surpulus Allocative Efficiency PED

XED YED PES Tax Specific Tax Ad valorem Tax Incidence Deadweight Loss Subsidy Price Ceiling Price Floor Market Failure Externality Marginal Social Benefit Marginal Private benefit Marginal Social Cost Marginal Private Cost Merit Good Demerti Good Public Good Tradable Permits Monopoly Power Revenues Profit Short Run

Long Run Implicit Cost Explicit Cost

Law of Diminishing Returns Increasing Returns to Scale Constant Return to Scale Decreasing Returns to Scale Economies of Scale Diseconomies of Scale

Minimum Efficient Scale Economic Profit Perfectly Competitive Market Allocative Efficiency Productive Efficiency Monopoly Barriers to Entry Natural Monopoly Price Discrimination Monopolistic Competition Oligoply Game Theory Collusion Cartel

Definition The amount of ouput an industry can produce in the short run beyond its current level without having to epxnaid its plant size. If large amounts of excess capacity exist, producers can be highly responsive to changes in the price. With little excess capacity, producers cannot respomd quickly to changes in A problem that arise when something is both limited in supply and desired The field of study that concerns itself with the alocation of scarce resources between the competing needs and wants of society A market is a place where buyers and seller come together to engage in exchange with one another What must be given up in order to undertake anyactivity or economic exchange. Opportunity costs are not necessarily monetary; rather, when you buy something, the opportunity cost is what you could have done with money you spent on that thing. Even non-monetary excahnges involve opportunity costs, as you might have chosen to do something different with your time A latin phrase meaning "other things equal". Ecoomists assume ceteris paribus when examining certain variables in an economic model. This allows us to easily examine the relationship betwene one variable and another without complciating our analysis with all the other things that could cause the variable in question to change Economic gorowth is an increase in the output of goods and services in a nation over time. The ouput attributable to each unit of input. Increases in the productivity of land, labour, or capital lead to an overall increase in the output of nation Demand is the quantity of a good or service that consumers are willing and able to buy at a given price during a specific time period States that as the price of a good increases, the quantity demanded of the good decreases. The converse is also true: as the price of a good decreases, the quantity demanded of that good increases The additional utility or satisfaction derived by an increase or decrease in the amount of an item consumed or an activity enjoyed The good for which consumer demand increases when income increases and vice versa A good for which consumer demand decreases when income increases and vice versa One for which demand will increase when the price of another good increases and vice versa One for which demand will increase when the price of another decrease, and vice versa Supply is the quantity of a good or services that producers are willing and able to provide at a given price level and during a specific time period A good that can be produced in a similar way, with similar inputs and processes, as another good Market equilibrium occurs at the price where the quantity demanded and quantity supplied are equal(also called the market-clearing price) The benefit consumers receive when they pay a price below what they are willing to pay The benefit producers gain when they receive a price above the one at which they were willing to supply Allocative efficiency is achived if society produces enough of a good so that the marginal benefit is equalt to the marginal cost A measure of the responsiveness of consumer to a change in price

A measure of the responsiveness of consumers of one good to a change in the price of a related good A measure of the responsiveness of consumers' demand for a particular good to a change in their income A measure of the reponsiveness of a producer of a partciular good to a change in the price of that A charge, placed on an invidividual or firm, that is payable to the government under punishment of Also known as flat-rate or per-unit tax, is a set amount charged on per unit of the product sold A percentage tax on a good or a range of goods A measure of the consequences ofa tax on all the affected parties The loss of welfare, utility or benefit to market participants, typically as a result of taxes, protectionist policies or externalities A form of payment from government to a firm or an individual with the purpose of increasing purchases or production of a good A maximum legally allowable price for a good below eqm price, set by the government A minimum legally allowable price for a good above eqm price, set by the government Any situation where the allocation of reousrce by a free market is not efficient A transaction where someone other than the buyer or seller (a third party), experiences a benefit or loss as a result of the transaction All the benefit or utility derived from the consumption of a good, including those to the consumers and to the rest of the society Benefit derived excuslivey by the consumers All the costs incurred from the production and consumption of a goods, including those incurred by the producers and rest of society Costs suffered solely by the producer One for which the marginal social benefits exceed the marginal social costs when sold on the open market One for which the marginal social cost exceed that marginal social benefts when sold on the open market A good that is non-rivalrous and non-excludable, and is typically provided by the government A system for taxing pollution where pollution licenses are exchangeble for firms on a secondary The power of a firm to raise the price above the prices of competitors The income earned from a firm's sale of its good or service to consumers in the product market The diference between total revenues and total costs The time period in which the number of sellers in a market is fixed and the amount of capitals employed by each firms are fixed too The time period in which the amount of buyer in a market is not fixed, and the amount of capital investment is variable. When there is an increasei n demand, more firms enter the market, and more firms csell their goods at cheeaper prices, and vice versa. The opportunity costs faced by entrepreneurs when they operate their own businesees instead of working for someone else,also known as normal profit Monetary payments a frim makes to the owners of the resources it employes in production

As more and more a variable resources are added to a fixe resource, beyond a certain point the producitvity of additional units of variable reousrces decline. Because the amount of capital is fixed in the shrot run, more workers find it harder to continually add to the firm's otuput, so they become less prodcutive as they are added in the short run. The law of diminishing returns explains the shapes of a firm's short run labor productivity curves An increase in input leads to larger proportional increase in output An increasei in input leads to a prorortionally identical increase in output An increase in the quantity of inputs leads to a proportionally smaller increase in output Cost-reducing advanatges that allow a firm to produce at ATC as it expands its production in the long run, adding new labour, land, and capital The factors that cause a firm to experience rising ATC as it grows in size.If a firm adds a factory and ATC rises across all its factories, it is experiencing diseconomies of scale The size a firm must achieve in order to produce its output at the lowest possible per-unit (or average) total cost. Before this level of ouput, the firm experineces increasing returns to scale; beyond returns to scale are constant or decreasing Economic profit is earned when a firm's total revenue exceeds its total implicit and explicit costs. It is greater than normal profit, so is also referred to as abnormal or supernormal profits A market is perfectly competitive if there are large number of producers producing identical products at identical costs, and where consumers have perfect information and there is a low barrier of entry Achived when the resources used to produce a goods is used in the least-cost manner The right amount of goods or service and the marginal benefit enjoyed by society are equal to the marginal cost incurred in its production A market where one firm dominates the market for a good that has no substitutes and where significant barriers to entry exists The technical, competitive, or cost-related impediments to joining a market and competing against the existing firms A natural monopoly occurs in a market where the lowest costs can be achived when only one firm sells to the market. It is typically asoscited with large fixed start-up costs Price discrimination occurs when diferent prices are charged to different consumers for the same good by the same provider A market is monopolistically competitive when there are large amount of producers producing differentiated products and where there is low barriers to entry A oligopoly is market where few sellers dominate the market for an identical or diferentiated good, and where there are significant barriers to entry Game theory is a branch of mathematics and social sciences that tries to capture behavior in strategic situations (games) An agreement, whether formal or informal, between competitive parties to raise price A group of competitors that successfully limit competition and keep prices above a competitive norm

Terms National Income Accounting GDP GNP NNP Nominal GDP Real GDP Per Capital GDP ppp The Business Cycle Aggregate Demand Marginal Propensitieis to Consume, Save, Tax, and Import Wealth

Interest Rate

Lonable funds market

Sticky Wage/Stikcy Price Model Unemployment

Labor Force Prticipation Rate

Definition A term that describes a set of principles and standards used by countries to measure their prodution and income The value of all final goods and services produed in a coutnry within a given time period The market value of all final goods and services produced by the labor and capital supplied by the residents of a country over a given period of time The market value of production supplied by labor and capital supplied by the residents of a coutnry, ninus the depreciated value of capital goods The value of all goods and services produced in a country within a given time period, calculated using current price . Using base year price National income divided by population Purchasing power parity is the thory that, in the long run, identical products and services that are sold in different countries should cost the same A term used to describe the flucations of national income from expansion to contraction to recovery. It can also be associated with changes in price levels The total demand for a nation's goods and services from domestic households, firms, the government and foreigners Measures the proportion of a change in household incoem that is used to consume domestic output, saved by households, paid in taxes and used to purchase imports, respectiveyly The total value of the accumulated assets owened by an individual, household, community or country, ninus all its liabilities Interest rate is the opporutnity cost of spending money. If firms or households borrow money to finance spending on capital or land, the interst rate is the price they must pay above and beyond the amount borrowed to the bak. Therefore, there is an iverse relatonship between the interest rate in a nation and the quantity of ufnds dmeanded for investment and consumption A ypothetical market that shows the relationship between the real interest rate in a country and the supp;y and demand for money from households and firms for private investment. In eqm, the quantity supplied by households (who save money in commercial banks) and demanded by firms (who borrow from banks to finance capital spending) are equal Another name for the Keynesia, short-run aggrgate supply curve. Because firms find it difficult to cut workers' wages in the short run, they must lay workers off to reduce costs, hence output and employment fall when AD falls in the short run Condition of somoene of working age who is willing and able to work, actively seeking employment, but unable to find a job The proportion of the working-age population that is either unemployed or employed. If the LFPR drops, it may be because people have chosen to give up searching for jobs or they have decided to retir early or go back to school. A decline in the LFPR can cause the unemployment rate to understate the true number of poeple out of work in a nation

Type Linear Demand and Supply Curve

Explanation

Determinants of demand Determinants of supply