Economics Vocabulary Words

Refers to the quantity of a good or service that firms are willing and able to provide.

The quantity of a good or service that consumers are willing and able to buy.

The responsiveness of the quantity demanded to a change in price, measured by dividing the percentage change in the quantity demanded of a product by the percentage change in the product’s price.

measures the responsiveness of the quantity demanded of a good to the change in the income of the people demanding the good. Formula: (%change in quantity demanded) / (%change in income) = Income elasticity.

the ratio of the percentage change in quantity demanded of one good to the percentage change in the price of some other good. A positive coefficient indicates the two products are substitute goods; a negative coefficient indicates they are complementary goods.

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.

A period during which at least one of a firm’s resources is fixed.

A period during which all factors of production are variable.

Total revenue minus total cost.

Total revenue is entire amount of income before any deductions are made. Average revenue is the total revenue per unit of output. Marginal revenue is the extra revenue to be earned from the production of the next product.

As extra units of a variable factor are added to the given quantity of a fix factor, the output from each additional unit of the variable factor will eventually distinguish.

The rate at which output increases in response to proportional increases in all inputs. Increasing returns to scale is when the price of production for each product decreases as production increases. Decreasing returns to scale is when the price of production for each product increases as production increases. Constant returns to scale is when the price of production does not change as production increases (all in long run).

Reduction of long-run average costs resulting from an expansion in the scale of a firm’s operations so that more of all inputs is being used.

A market structure that is characterized by a large number of small firms, a homogeneous product,freedom of entry and exit,and equal access to information

A method of setting prices that occurs when marginal revenue equals marginal cost.

The opportunity cost of the resources supplied by the firm’s owners; normal profit= accounting profit – economic profit

Where total revenue exceeds total economic costs

When the last unit produced costs the same as the benefit recieved by consumers

Good that is under-supplied with positive externalities.

Good that is over-supplied with negative externalities.

Good that consumers demand more of when their incomes increases.

Good that is both nonrivalrous and non-excludable, and not provided by the market.

Consequences (positive/negative) upon consuming a good or service.

Consequences (positive/negative) upon producing a good or service.

Black market that is considered illegal.

Under supply of some good or service/The quantity demanded for that good at a certain price is more than the quantity supplied at that price.

The ability of consumers to decide between two or more products.

Cost of an economic decision in terms of the next best alternative foregone.

The four types of resources used in the production process: land, labor, capital and entrepreneurship.

One of the four factors of production that includes natural resources and the surface over which the good or service is produced.

One of the four factors of production which includes the machinery and technology used to produce a good or service.

The factor of production involving organizing of the other factors and/or risk taking.

The interaction between buyers and sellers in order to exchange goods or services or buyers and sellers coming together in order to exchange a good or service.

The quantity demanded by the buyers at a price.

The quantity of a good or service demanded by the market at a certain price.

As prices increase, the quantity demanded decreases, while if the price decreases, the quantity demanded for the product increases.

A line/curve on a graph that depicts the changes in quantity demanded due to price changes for every point on the graph.

Factors that affect the demand curve by shifting it right or left.

The total amount a seller produces of a good or service.

The overall production of a good.

Factors that affect the supply curve by shifting it right or left.

The market-clearing price, set where Demand equals Supply.

The system in a market economy by which any changes in supply or demand have an effect on changing the price of a good or service.

Over supply of some good or service/The quantity demanded for that good at a certain price is less than the quantity supplied at that price.

A good or service that reacts by a PED of greater than 1 when the price is changed.

A good or service that reacts by a PED of less than 1 when the price is changed.

A good or service that reacts by a PED equal to 1 when the price is changed.

Zero change of the quantity demanded

Decrease of quantity supplied to 0 after any increase in price. On the graph, this is horizontal demand line.

A similar type of good that can replace another good. When demand for one good goes up (demand curve shifts right), the demand for the substitute decreases (demand curve shifts left).

A good that often accompanies another good. When the demand of a certain good decreases and the demand of another good also decreases, the second good is a complement of the first good.

A type of good for which the demand declines as the income increases.

A certain amount of tax that is added upon a product by the government.

A certain percent of the product that is added as the tax by the government.

A tax that is measured by the amount of labor done, not by property.

An analysis of a particular type of tax on the distribution of economic welfare.

An amount of money provided by the government to firm to increase production for that specific good or service.

A maximum price limit for a certain good imposed by the government to protect consumers from condition that would make necessary goods unattainable.

A minimum price limit for a certain good imposed by the government to prevent prices from dropping too much.

The amount of consumer benefit by being able to purchase a product for less than what a consumer was willing to pay.

The amount of producer benefit by being able to sell a product for more than what a producer was willing to.

Total of consumer and producer surplus.

Benefit in not only monetary terms for a firm by producing the next product.

Benefit in not only monetary terms for a community by producing the next product.

The monetary and opportunity cost of producing the next product for a firm.

The monetary and opportunity cost of producing the next product for a community.

A government licence that allows for a firm to produce a certain amount of pollution. Can be traded and/or bought from other firms.

The loss of community surplus (producer plus consumer surplus) in an imperfect market.

A tendency for consumers to not buy a public good in hope of attaining benefits of a public good for free by the consumption of this public good by other consumers. In this way, nobody buys the public good.

A resource that provides users with tangible benefits, while a major concern being overuse of these common access resources.

The ability of a firm to remain in the market over a duration of time.

Information that has not been provided correctly, or is provided partially as a strategic move.

Total product is the total amount of goods or service produced by a firm. Average product is product that is divided by total input (workers in most cases). Marginal product is the next product to be produced.

The addition of monetary and opportunity costs.

Costs for a firm that don’t change in the short run. These costs include rent for land and interest for capital.

Costs for a firm that change in the short run and long run. These include the wages for labor.

Total cost is the addition of variable and fixed costs. Average cost is the total cost per product. The marginal cost is the cost of the next product to be produced.

Firms that produce output at a greater cost than they previously were in long term.

Using the graphs to find the intersection of average cost curve and marginal cost curve, which would provide the point of maximum revenue.

The point at which the firm is producing for the greatest profits in a short run situation.

A decision making strategy that aims for satisfying or mediocre results rather than optimal results.

One of the four factors of production. The work force of a firm or community that creates the goods or services using the other factors.

Part of economics that is concerned with large-scale or general economics factors related to countries.

Economic theory that all money stays inside a closed system, i.e. the firms and houses of a community/nation excluding injections and leakages.

The amount of money that exits the 4 sector circular flow due to things like imports, etc.

The amount of money that enters the 4 sector circular flow due to things like exports, etc.

The total value of all goods and services produced in a nation over the period of one year.

The total value of all goods and services produced by the nation’s citizens in a nation and the total of all goods and services produced outside the nation by citizens of that nation over the period of one year.

Value of goods and services produced in macroeconomics adjusting to price changes over one year.

Value of goods and services produced in macroeconomics not adjusting to price changes over one year.

Index of economic growth with negative environmental consequences factored in over one year.

Output Method: Method through which the GDP is determined by adding costs of consumption and subtracting it by immediate consumption. Expenditure method:GDP = C + G + I + NX Income method: Indirect taxes minus subsidies and depreciation is added to GDP.

Method of converting Nominal GDP of one year to Real GDP comparative to another year.

All business first start expanding. Due to laws of nature, they are bound to contract at one time in their life. If they do survive the contraction, the businesses will recover to start expanding again.