Microeconomics & Businesses Vocab Flashcards
(22 cards)
Fixed Cost
Does NOT change in short run, no matter how much output is produced
ex. rent / mortgage / property taxes / insurance
(aka “overhead”)
Long Run
Period of time during which all resources/costs can be changed
Advertising
Specific way of convincing consumers to buy the good or service
Goal: make demand for product inelastic (to increase price & not lose much business)
Plant
physical establishment used in process of making & distributing goods/services
Marketing
process of anticipating, identifying, & satisfying customer demands profitably Encompasses: 1. product research 2. consumer research 3. distribution (logistics) 4. advertising
Durable Goods
things that are expected to have a life/use longer than a year
ex. car, furniture, TV, washing machines, computers
Firm
business organization which owns & operates these plants [basically just a company]
Stocks
shares of ownership in a company
*riskier to own (if company fails, price of stocks go down)
Sole Proprietorship
Unincorporated business firm owned/operated by single individual (married couple law sees you as one)
Marginal Revenue
Δ in Total Revenue / Marginal Product
Limited Liability
personal assets are not a part of business (if something goes wrong with business and you owe money it doesn’t come from personal $$$)
Marginal Product
amount by which TP changes w/ each additional resource
assuming all other resources remain the same
Variable Cost
change as the output increases
ex. workers
Bonds
lending money to company in exchange for interest & repayment
- borrow from financial institutions
- Less risky bc you get paid back
Marginal Cost
Δ in Total Cost / Marginal Product
Services
an intangible benefit or action which one values
*ex. entertainment, going to sporting event or concert, going to see a doctor/lawyer bc you’re paying for the service & ability s/he have to do that
*the more your service is valued, the more you get paid
Short Run
Period of time in which at least one resource/cost is fixed
Nondurable Goods
goods expected to have a use of less than a year
ex. food, clothes
Industry
group of firms with same/similar goods/services
Corporation
Legal entities, distinct & separate from individuals who own them
Law of Diminishing Returns
States that as more units of one resource are added to all other resources, MP eventually declines
(This is the most important feature of production in the short term)
Economies of Scale
Company’s Long Run average costs go down as production increases
Why: specialization of labor
