Session 1 Flashcards
microeconomics
- the behaviour of individual economic units and how they make decisions
market economy
prices determined by the interactions of consumers, workers, and firms
centrally planned economy
prices are set by the government
market
collection of buyers and sellers who interact with the intention of trading a good or service
industry
collection of firms that sell the same or closely related products
arbitrage
buying at a low price in one location and selling at a higher price somewhere else
perfectly competitive markets
many buyers and sellers so that no single buyer or seller has an impact on the price
non-competitive market
individual firms can affect market price
market price
price prevailing in a competitive market
nominal price
unadjusted for inflation
real price
adjusted for inflation
consumer price index
measures the rate of inflation in economy, how the cost of goods changes over time
producer price index
prices at the wholesale level change over time (measures cost inflation and predicts future changes in the CPI)
production function resources (4)
labour (L)
capital (K)
technology (A)
Land
opportunity cost
the loss of other alternatives when one alternative is chosen
