Microeconomics vocabulary

Before we dive into the principles of microeconomics, we need to define some of the major ideas that lie at the heart of economics. What is the economic way of thinking? What do economists mean when they discuss market structure and the invisible hand?

Microeconomics vocabulary

Each of the firms will account for a large proportion of output. In an oligopolistic market there will tend to be a high degree of interdependence between the firms as they will watch carefully what the other firms are doing.

Duopoly Duopoly is a market structure where the market is dominated by two firms. Monopolistic Competition An industry in monopolistic competition is an industry made up of a large number of small firms who produce goods which are only slightly different from that of all other sellers.

It is similar to perfect competition with freedom of entry and exit for firms nd any supernormal profits earned in the short-run will be competed away in the long-run as new firms enter the industry and compete away the profits.

Price A Microeconomics vocabulary is the amount of money a Microeconomics vocabulary or service is bought for. Prices are determined in a market economy by the forces of demand and supply. Price Signal Price signals are a vital part of a market system. Changes in price act as a signal about the way resources should be allocated.

Microeconomics vocabulary

For example a rise in price encourages producers to switch into making that good but encourages consumers to use an alternative substitute product therefore rationing the product. Demand A curve showing the amount of a good consumers are willing and able to buy at each and every price level.

The curve is downward sloping because as price increases, demand falls.

Microeconomics vocabulary

The curve is drawn on the assumption of all other determinants of demand income, tastes and so on remaining constant the ceteris paribus assumption. Law of Demand The higher the price, the less the demand for the product.

Ostentatious Goods A Veblen is a good that has an upward-sloping demand curve.

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People buy more of the Veblen good because it is more expensive and therefore demand is higher when the price is higher.

Giffen Goods A Giffen good is a good for which an increase in income results in a fall in demand for the good. It is an extreme inferior good and will have a perverse i.

Expectations Expectations are what consumers and producers anticipate will happen to key economic variables e. Supply Supply is the amount of a good which firms are willing and able to sell at a given price.

Subsidy A subsidy is a payment made to firms or consumers designed to encourage an increase in output. A subsidy will shift the supply curve to the right and therefore lower the equilibrium price in a market.

Minimum Price Control A minimum price is a price floor set by a government or other agency below which the price charged is not permitted to fall. An example of a minimum price is a minimum wage which is a limit on the price in the labour market.

One effect of a minimum price if set above the equilibrium in the market is to cause excess supply of a good. It has therefore been argued that a minimum wage may cause unemployment an excess supply of labour. Maximum Price Control A maximum price is an upper limit in a market set by a government or other agency above which the price charged is not allowed to rise.

The effect of this will generally be to create excess demand in a market if the maximum is set below the current equilibrium in the market. If the maximum is set above the equilibrium price there will be no immediate effect. Choose Type of service.A Glossary of Microeconomics Terms Abundance --A physical or economic condition where the quantity available of a resource exceeds the quantity desired in the absence of a rationing system.

Budget Set --Different bundles of goods and services that are attainable to the consumer at given market prices and the consumer's fixed level of income.

The purpose of this course is to provide you with a basic understanding of the principles of microeconomics. At its core, the study of economics deals with the choices and decisions that have to be made in order to manage scarce resources available to us.

Microeconomics is the branch of economics. Invest your time in learning these words related to microeconomics. You're sure to profit from reviewing supply and demand, competition, labor and wages, and more. This vocabulary list is like money in the bank. A Glossary of Microeconomics Terms Abundance --A physical or economic condition where the quantity available of a resource exceeds the quantity desired in the absence of a rationing system.

Budget Set --Different bundles of goods and services that are attainable to the consumer at given market prices and the consumer's fixed level of income.

Microeconomics is the branch of economics that pertains to decisions made at the individual level, such as the choices individual consumers and companies make after evaluating resources, costs, and . Microeconomics definition is - a study of economics in terms of individual areas of activity (such as a firm).

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