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Econ Terms
Term | Definition |
---|---|
Demand | how many things people want to buy |
Demand Schedule | like a list that shows how many of something people want to buy at different prices |
Diminishing Marginal Returns | when you get less of a benefit from doing more of something |
Elasticity of Demand | the degree in which demand responds to a change in an economic factor |
Elasticity of Supply | the responsiveness to the supply of a good or service after a change in its market price |
Equilibrium | when the amount of something that people want to buy is the same as the amount of something that people want to sell |
Excess Demand | when people want to buy more of something than there is available |
Factors of Production | the things that companies need to make a product four main factors - land, labor, capital, and entrepreneurship |
Human Capital | the skills and knowledge that people have that make them good at doing something |
Income Effect | refers to the changes in the consumption or purchasing power of an individual resulting from a change in their income. |
Inferior Good | a type of product that people buy less of as their income increases |
Law of Demand | when the price of a good or services increases the quantity demand decreases and when the price decreases the quantity demand increases |
Marginal Revenue | the additional revenue a company earns by selling one more unit of a product |
Market Supply Schedule | a table or graph that shows how many units of a product will be supplied at different prices |
Minimum Wage | the lowest amount that an employer is legally allowed to pay an employee for the work that they do. |
Normal Good | a good that people buy more of as their income increases |
Physical Capital | refers to the tools, machines, equipment, and other tangible assets that firms use to produce goods and services. |
Scarcity | limited availability of resources compared to the unlimited wants and needs of people |
Substitute Effect | refers to the changes in the consumption of a good resulting from a change in the price of a related good. |
Production Possibilities | refers to the different combinations of goods and services that can be produced within the available resources and technology |
Opportunity Cost | the cost of the next best alternative that must be given up in order to pursue a certain action or decision |
Utilization of Resources | Efficiency - all resources are used (any point on the line) Ineffective - not using all resources (below the line) Unattainable - (above the line) |
Pure Monopoly | a single firm is the sole producer and supplier of a good or service and there is no close substitutes |
First Characteristic of a Monopoly | One Seller (No comp) |
Second Characteristics of a Monopoly | No Substitutes of good quality |
Third Characteristics of a Monopoly | Entry into the market is blocked by barriers |
Fourth Characteristics of a Monopoly | Almost complete control of a market price |
Four Types of Monopolies | Natural, Geographic, Technological, and Government |
Natural Monopoly | 1. Produce products for lowest cost and force competitors out of business 2. Large investment needed 3. More efficient to have one company |
Geographic Monopoly | 1. Best location 2. Only local supplies of good/service |
Technological Monopoly | 1. New Invention 2. Government Patent |
Government Monopolies | 1. Created by legal barriers to entry |
Oligopoly | a market structure in which a few firms dominate the market. These firms have a significant control over the market, they tend to sell similar products and they have a large market share. |
Examples of Oligopolies | 1. Airline Industry 2. Motor Vehicles 3. Electric Bulbs 4. Greeting Cards |
Competition | the situation in which different businesses are trying to sell similar products or services to the same group of customers |
Perfect Competition | a market structure where there are many buyers and sellers, and the goods being sold are exactly the same |
Monopolistic Competition | when many companies offer competing products or services that are similar, but not perfect, substitutes. |