Microeconomics Flashcards

Only 10 flashcards are shown at a time! Once you’ve mastered these 10 Economic terms, click the shuffle button below for 10 new terms. There are approximately 115 flashcards covering Microeconomics.

Capital
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Human-made resources (machinery and equipment) used to produce goods and services; goods which do not directly satisfy human wants.

Capital
Ceteris paribus
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“All else equal”; used as a reminder that all variables other than the ones being studied are assumed to be constant.

Ceteris paribus
Free good
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A good that is demanded, but not limited in quantity, thus it is not scarce. Air is an example.

Free good
Producer surplus
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The additional benefit enjoyed by producers who would have been willing to sell their product for less than the market price. Graphically it is the area of the triangle below the equilibrium price and above the supply curve, out to the equilibrium quantity.

Producer surplus
Perfectly elastic Demand
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When any change in the price of a good leads to a nearly infinite change in the quantity consumers demand. For example if the price rises at all, no one will wish to buy the good. If the price decreases at all, every consumer will wish to buy the good. Demand for a perfect competitor’s output is perfectly elastic, due to the countless perfect substitutes available to consumers.

Perfectly elastic Demand
Commodity
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A good widely demanded (often globally) and supplied by many sellers, usually without much product differentiation between sellers. Commodities are standardized products. The price of commodities is determined by the market as a whole, often in the global market, not by any individual producer or group of producers. Often traded on national or international commodities markets. Examples include oil, wheat, corn, coffee, copper, cotton, tin, rice, gold, and other primary goods.

Commodity
Market Failure
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When the free market fails to achieve a socially optimal allocation of resources towards the production of a particular good or service.

Market Failure
Income Elasticity of Demand (YED)
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A measure of the responsiveness of consumers of a particular good to changes in their income. Calculated as the percentage change in the quantity of a good divided by the percentage change in consumers’ income. Can be negative (inferior goods) or positive (normal goods).

Income Elasticity of Demand (YED)
Depreciation (microeconomics)
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The decrease in the value of factors of production over time. Capital depreciates as it becomes more expensive to maintain over time.

Depreciation (microeconomics)
Private sector
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Refers to the activities undertaken by the private households and firms in an economy. “Private sector spending” includes household consumption and investment by private, non-government-owned firms.

Private sector

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