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Microeconomics Definitions

microeconomics is the study of individuals, firms or markets.


Macroeconomics is the study of a whole country's economy
growth an increase in production or income over a period of time
development an improvement in the quality of life for the majority of the population
sustainable development development that doesn't leave future generations worse off
positive something that can be objectively measured
normative something that is subjective and has a value judgement
ceteris paribus everything else remains equal (latin)
land any raw material
labour people paid to work
capital something man-made used in production
entrepreneur a person that combines the other resources in production
rent the payment from land
wage the payment for labour
interest the payment from capital
profit the payment to entrepreneurs
utility a unit of happiness
opportunity cost the difference between the best and next best alternatives
free good one with no opportunity cost
economic good one with an opportunity cost
mixed economy one that combines the private and public sector
public sector that owned by the government
private sector that owned by private individuals
planned economy one where what, how and for whom to produce is decided by the government
market economy one where the free market decides what and how to produce
transition economy one changing from planned to market economy
market a place where buyers and sellers meet
monopoly a market of one firm or dominated by one firm
oligopoly a market dominated by a few firms
monopolistic competition a market with low barriers to entry and many firms
perfect competition a market with no barriers to entry and many firms
barrier to entry the cost of entering a market
demand the quantity people are willing to buy at a given price
supply the quantity firms are willing to sell at a given price
tax an extra cost imposed by the government that increases the price
subsidy a negative tax when government gives money to reduce the price
maximum (ceiling) price a price set below the equilibrium
minimum (floor) price a price set above the equilibrium
price support/buffer stock schemes a process to control the price using a stock of unsold goods.
commodity price agreements a international agreement to control the price of a good
Price Elasticity of Demand (PED) the responsiveness of the quantity demanded to a change in price
Cross Price Elasticity of Demand (XED) the responsiveness of the quantity demanded of one good to
a change in price of another (related) good
Substitute good a good that is an alternative in demand
Complement good a good that is bought together with another
Income Elasticity of Demand (YED) the responsiveness of the quantity demanded to a change in
income
Inferior good a good for which demand falls when income rises
Normal good a good for which demand rises when income rises
Price Elasticity of Supply (PES) the responsiveness of the quantity supplied to a change in price
Primary sector the supply of land
Secondary sector the supply of goods
Tertiary sector the supply of services
Positive externality a benefit to society that gives utility to society and not just individuals
Negative externality a cost to society that is not paid for by firms in the production process
Public good a good that is non-rivalrous and non-excludable
Merit good a good that gives positive externalities through consumption
Demerit good a good that gives negative externalities through consumption
Tradable permits permits to pollute given amounts that may be bought and sold