34 terms

Microeconomics glossary

Groups who have an interest in the activity of business
A monopoly that is owned and managed by the government
State monopoly
Government-provided goods or services - funded through tax revenue, in order to provide goods which have positive externalities or are public goods
State provision
Payments by the government to suppliers that reduce their costs. The effect is an increase in supply and a reduction in the market equilibrium price.
Goods in competitive demand and act as replacements for another product.
A product that could have been produced using the same resources.
Substitutes in production
The quantity of a good or service that a producer is willing and able to supply onto the market at a given price in a given period of time.
Different stages of making, distributing and selling a good or service from the production parts, through to distribution and sale of the product.
Supply chain
An event that directly alters firms' costs and prices shifting the supply curve either outward or inward.
Supply shock
The preference of consumers
The manner in which the burden of an indirect tax is shared between participants in the market.
Tax incidence
Time lags occur in production e.g. Agriculture, where decisions about the QTY to be produced are made ahead of the actual sale. Demand and the price may change in the interval, creating issues for the producer.
Time lags
When no one owns a resource, it gets over-used without regard to the effect on others e.g. fish stocks, deforestation
Tragedy of the commons
Costs that parties incur in the process of agreeing and following through a deal
Transactions cost
Government welfare benefits made available through the social security system
Transfer payments
A view of the rightness or wrongness of something, based on personal view which cannot be empirically verified.
Value judgement
Costs which vary directly with output e.g. raw materials, labour costs and consumables
Variable costs
The maximum price a consumer is prepared to pay to obtain a product
Willingness to pay
Shows the relationship between price and quantity demanded.
Demand curve
The consumption of demerit goods can lead to negative externalities which cause a fall in social welfare. Government usually seek to reduce the consumption of them. Consumers may have imperfect information.
De-merit goods
The demand for a product might be strongly linked to the demand for a related product.
Derived demand
As more of a variable factor is added to a fixed factor a firm will reach a point where it has a disproportionate quantity of labour to capital so the marginal product of labour will fall. This raises marginal costs.
Diminishing returns
Income that remains after direct taxes and government charges have been paid.
Disposable income
The reduction of risk achieved by replacing a single risk with a larger number of smaller unrelated risks.
The specialization of labour in specific tasks, intended to increase productivity.
Division of labour
A reduction in an organisation's workforce
making the best use of scarce resources among competing uses so that economic and social welfare is maximized.
Economic efficiency
An increase in the productive potential of the country, shown by an outward shift of the PPF. measured by real GDP or potential GDP.
Economic growth
Government policies aimed at influencing trends in the economy.
Economic planning
reductions in long-run average costs from an increase in the scale of production.
economy of scale
Where it is cheaper to produce a range of products
Economy of scope
Where a consumer's desire to buy a product is backed by an ability to pay for it.
Effective demand
demand for which price elasticity is greater than 1
Elastic demand
where the price elasticity is greater than +1
Elastic supply