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IB economics > Microeconomics terms > Flashcards

Microeconomics terms Flashcards

1
Q

demand

A

indication of various quantities of a good the consumer is willing and able to buy at different possible prices during a particular time period, ceteris paribus

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2
Q

supply

A

indication of various quantities of a good the producer is willing and able to produce and supply to the market at different possible prices during a particular time period, ceteris paribus

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3
Q

law of demand

A

There is a negative relationship between the price of a good and its quantity demanded over a particular time period, ceteris paribus

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4
Q

law of supply

A

There is a positive relationship between the price of a good and its quantity supplied over a particular time period, ceteris paribus

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5
Q

marginal cost

A

the additional cost of producing one more unit of output

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6
Q

market equilibrium

A

the situation, when the quantity demanded is equal to the quantity supplied

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7
Q

signal

A

price communicates information to the decision-maker about the existence of excess in supply or demand

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8
Q

incentive

A

price motivates decision-maker to respond to the information signaled

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9
Q

allocative efficiency

A

refers to producing quantity of goods most wanted by socienty

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10
Q

nudge

A

method of influencing consumers’ choice in the desired way by manipulating the context in which is the decision made

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11
Q

price elasticity of demand

A

a measure of responsiveness of the quantity of a good demanded to changes in its price

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12
Q

income elasticity of demand

A

a measure of responsiveness of demand to changes in income (including demand curve shifts)

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13
Q

price elasticity of supply

A

a measure of responsiveness of the quantity of a good supplied to changes in its price

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14
Q

price controls

A

the setting of minimum or maximum prices by the government so that prices are not able to adjust to the equilibrium level determined by demand and supply

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15
Q

price ceiling

A

maximum price set below the equilibrium price to make goods more affordable

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16
Q

price floor

A

minimum price set above the equilibrium to provide income support to farmers or low skilled workers

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17
Q

welfare loss

A

welfare benefits lost due to society not allocating resources efficiently

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18
Q

indirect taxes

A

taxes paid to the government by the producers (but paid by both consumers and producers)

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19
Q

direct taxes

A

taxes paid directly to the government by taxpayers

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20
Q

subsidy

A

financial assistance by the government to firms to increase their level of output and lower prices for consumers

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21
Q

rivalrous

A

its consumption by one person reduces its availability for someone else

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22
Q

excludable

A

it is possible to exclude someone from using the good

23
Q

common-pool resources

A

rivalrous but non-excludable goods

24
Q

market failure

A

failure of the market to allocate resources efficiently

25
Q

allocative inefficiency

A

too much or too little of the goods are produced or consumed from the point of view of what is socially most desirable

26
Q

externality

A

occurs when the actions of consumer or producer give rise to negative or positive side effects on other people who are not part of these actions

27
Q

marginal private costs

A

costs to a producer of producing one more unit of good

28
Q

marginal social costs

A

costs to society of producing one more unit of good

29
Q

marginal private benefit

A

benefit to consumer from consuming one more unit of good

30
Q

marginal social benefit

A

benefit to society from consuming one more unit of good

31
Q

negative production externalities

A

external costs created by producers

32
Q

negative consumption externalities

A

external costs created by consumers

33
Q

positive production externalities

A

external benefits created by producers

34
Q

positive consumption externalities

A

external benefits created by consumers

35
Q

public good

A

non-rivalrous and non-excludable

36
Q

quasi-public good

A

non-rivalrous but excludable

37
Q

private good

A

rivalrous and exludable

38
Q

asymetric information

A

situation where buyers or sellers do not have equall access to information

39
Q

adverse selection

A

situation, where one party in a transaction has more information about the quality of the product sold than the other party

40
Q

moral hazard

A

situation where one party takes risks but does not face the full costs of these risks because the costs are borne by the other party

41
Q

market power

A

the extent to which each individual firm in the industry is able to control the price at which it sells its products

42
Q

barriers to entry

A

anything that can prevent a firm from entering an industry

43
Q

economies of scale

A

a decrease in the average costs that occurs as a firm increases its output by varying its inputs

44
Q

natural monopoly

A

a single firm that can produce for an entire market at a lower average price than two or more firms (due to economies of scale)

45
Q

game theory

A

mathematical technique analyzing the behavior of decision-makers who are dependent on each other, and who display strategic behavior

46
Q

prisoner’s dilemma

A

a firm can become worse of by trying to increase its profit, this is illustrated at the Nash equilibrium of the payoff matrix

47
Q

collusion

A

agreement among firms to fix prices or divide the market between them to limit competition and maximize profit

48
Q

inferior good

A

good, for which demand varies inversely with the income

49
Q

short run

A

time period during which at least one intput is fixed and cannot be changed

50
Q

long run

A

time period during when all inputs can be changed

51
Q

merit good

A

a good that is desirable for the consumers but is underprovided by the market

52
Q

scarcity

A

condition of having unlimited wants/desires and limited resources

53
Q

opportunity cost

A

cost of any activity measured in terms of the value of the next best alternative foregone

54
Q

sustainability

A

a situation in which the consumption needs of present generation are met without reducing ability to meet needs of future generations

IB economics (9 decks)

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