Micro Key Words Flashcards
(29 cards)
Allocative efficiency
an efficient market whereby all goods and services meet the needs and wants of society
Capital
the physical or financial resources used to produce value in an economy
Ceteris Paribus
All other things remain equal
Finite Resouces
Non-renewable resources
Imperfect information
occurs when the economic agents lack information about a good or any other information relevant to the transaction
Opportunity Cost
money or benefits lost by not selecting a particular option during the decision-making process
Rationing Price Function
When the supply of a good is limited, its price increases, which can help to reduce demand and allocate the available quantity to those who are willing and able to pay the higher price.
Normative Statement
Statements that make a value judgement
Positive Statement
Statements that describe or explain a phenomenon or relationship in the world
Bounded Rationality
the way that humans make decisions that depart from perfect economic rationality since we are limited by our mental capacity, the information available to us, and time
Heuristics
mental shortcuts that allow people to solve problems and make judgments quickly and efficiently
Utility
A term used to determine the worth or value of a good or service
Derived Demand
The demand for a good or service that results from the demand for a different, or related, good or service
Normal Good
Goods whose demand increases with an increase in income
Productive Efficiency
That ability of a firm to produce goods or services at the lowest possible cost, given the level of output and the available technology
Technical Economy Of Scale
A type of internal economy of scale, achieved via technology
Normal Profit
A profit metric that takes into consideration both explicit and implicit costs
Sunk Cost
An investment already incurred that can’t be recovered
Contestability
A company can be challenged or contested by rival companies looking to enter the industry or market
Deadweight Loss
The loss of efficiency for society as a whole. Either producers, consumers, or the government will lose
Hit and Run
When a firm temporarily enters a market and then leaves when supernormal profits are exhausted
Kinked Demand Curve
A demand curve that is not linear but has different degrees of elasticity at different price levels
Monopoly
A market structure that consists of a single seller or provider and no close substitutes
Natural Monopoly
a type of monopoly in an industry or sector with high barriers to entry and start-up costs that prevent any rivals from competing
