Microtheory (APUA) Flashcards
Demand
The relationship between the quantity of a good consumers are willing to buy and its price. Key factors include consumer preferences, income, and substitute goods.
Supply
The relationship between the quantity of a good that producers are willing to sell and its price. It is influenced by production costs, technology, and input prices.
Market Equilibrium (markkina tasapaino)
The point where the quantity demanded equals the quantity supplied, determining the market price.
Average Cost (AC)
Total cost divided by the quantity produced.
Marginal Cost (MC)
The additional cost of producing one more unit of output.
relationship between AC and MC
helps determine the firm’s optimal output level.
Total Revenue (TR)
The total income a firm receives from selling its goods, calculated as price × quantity.
Total Cost (TC)
The total expense incurred in producing a good, including both fixed and variable costs.
Marginal Revenue
The additional revenue gained from selling one more unit of a good.
Profit
Defined as total revenue minus total cost. Firms aim to maximize profit, which occurs when marginal revenue (MR) equals marginal cost (MC).
Perfect Competition
Many small firms, identical products, free entry and exit, with firms being price-takers. No single firm can influence the market price.
Oligopoly
A few large firms dominate the market, and their decisions are interdependent. Firms often engage in strategic behavior (game theory).
Monopolistic Competition
Many firms sell differentiated products, with some degree of market power, but free entry and exit in the long run.
Monopsony
A market structure where there is only one buyer facing many sellers.
Consumer Surplus
The difference between what consumers are willing to pay for a good and what they actually pay. It measures consumer benefit from market transactions.
