100 Economics Terms

• economics is..

  a science that studies behaviour as a relationship between end and scare resources means that have alternative use
• main government objectives include:

  low and stable inflation + high and stable economic growth + low unemployment + good balance on payment position
• government objective is to

  improve economic welfare of inhabitants
• minor objectives

  low gov debt + equitable distribution of income
• Marginal Product of Labor


  the increase in the amount of output from an additional unit of labor
• Monopoly


  a firm that is the sole seller of a product without close substitutes
• Capital


  the equipment and structures used to produce goods and services
• Lorenz Curve


  a curve showing the distribution of income in an economy. The cumulated percentage of families (income receivers) is measured along the horizontal axis and the cumulated percentage of income is measured along the vertical axis
• Factors of production


  the inputs used to produce goods and services
• Game theory


  the study of how people behave in strategic situations
• Nash equilibrium


  a situation in which economic actors interaction with one another each choose their best strategy given the strategies that all the other actors have chosen
• Cartel


  a group of firms acting in unison
• Collusion


  an agreement among firms in a market about quantities to produce or prices to charge
• Monopolistic completion


  a market structure in which many firms sell products that similar but not identical
• Oligopoly


  a market structure in which only a few sellers offer similar or identical products
• Price discrimination


  the business practice of selling the same good at different prices to different customers
• Natural Monopoly


  a firm that arises because a single firm can supply a good of service to an entire market at a smaller cost than could two or more firms
• Sunk cost


  a cost that has already been committed and cannot be recovered
• Marginal revenue


  the change in total revenue from an additional unit sold
• Average revenue

  total revenue divided by the quantity sold
• Competitive market


  a market with buyers and sellers trading identical products so that each buyer and seller is a price taker
• Constant return to scale


  the property whereby long run average total cost stays the same as the quantity of output changes
• Diseconomies of scale


  the property whereby long run average total cost rises as the quantity of output increases
• Economies of scale


  the property whereby long run average total cost falls as the quantity of output increases
• Efficient scale


  the quantity of input that minimizes average total cost
• Marginal cost


  an increase in total cost that arises from an extra unit of production
• Average variable cost

  variable costs divided by the quantity of output
• Average fixed cost

  fixed costs divided by the quantity of output
• Average total cost

  total cost divided by the quantity of output
• Variable cost


  costs that vary with the quantity of output produced
• Fixed costs

  costs that do not vary with the quantity of output produced
• Diminishing marginal product


  the property whereby the marginal product of an input declines as the quantity of the input increases
• Marginal product


  the increase in output that arises from an additional unit of input
• Production function


  the relationship between quantities of inputs used to make a good and the quantity of output of that good
• Accounting profit

  total revenue minus explicit cost
• Economic profit

  total revenue minus total cost including explicit and implicit costs
• Implicit costs


  input costs that no not require the outlay of money by the firm
• Explicit costs


  input costs that require an outlay of money by the firm
• Profit

  total revenue minus total cost
• Total cost


  the value of the inputs a firm uses in production