Microeconomics: Demand, Supply, and Market Forces

Productivity

The amount of output per unit of input measured during a specific period of time. Ex. With 4 more workers output was increased by 10 cars a day.

Utility

a measure of the satisfaction and benefit gained from consumption of goods and services.

Fixed Cost

A cost that does not vary depending on production or sales levels. Ex. Rent

Tax

a fee charged by a government on a product, income, or activity.

Complements

a good that is consumed with another good. Ex. Cereal and milk.

Subsidy

a government payment or benefit to a producer of specific products.

Change in Demand or shift

a second demand curve has been introduced into the market because consumers are willing to buy more or less at every price due to a change in the market place other than price.

Change in Supply or Shift

a second supply curve has been introduced into the market because producers are willing to supply more or less at every price due to a change in the market place other than price.

Marginal Product

additional output due to an extra variable of input.

Supply

amount of a product that would be offered for sale at all possible prices that could prevail in the market, a direct relationship.

Quantity Demand

amount of goods desired and able to be purchased by consumers and business

Quantity Supplied

amount producers bring into the market at any given price.

Market

an arrangement between producers and consumers to conduct voluntary exchange of goods and services.

Diminishing Returns

at a point the gain from each addition input declines.

Elasticity

change in price causes large change in demand.

Variable Cost

cost that changes when the production of a business changes. Ex. Labor cost.

Production Function

describes the relationship between changes in output to different amounts of a single input while other inputs are held constant.

Inputs

factors of Production, resources that go into making products.

Supply Curve

graph showing the various quantities supplied at each and every price that might prevail in the market.

Law of Variable Proportions

in the short run, output will change as one input is varied while others are held constant.

Technology

knowledge and use of advanced tools and processes

Diminishing Marginal Utility

law of economics stating that as a person increases consumption of a product, while keeping consumption of other products constant, there is a decline in the benefit that person receives from consuming each additional unit of that product.

Demand schedule

listing of the various quantities of a particular product demanded at all possible prices in the market. (a table or chart)

Supply Schedule

listing of the various quantities of a particular product supplied at all possible prices in the market. (a table or chart)

Supply Elasticity

measure in which quantity supplied responds to a change in price.

Marginal Revenue

receipts gained from adding one additional unity

Substitutes

similar products that people will buy if the price of a product goes up; Ex. Beef vs. chicken.

Total Cost

sum of the fixed and variable costs.

Law of Supply

suppliers will normally offer more for sale at high prices and less at lower prices.

Total Revenue

the amount of money that a company receives from its production and sales in a given period of time. (Receipts)

Microeconomics

the branch of economics that studies how individuals, households, and firms make decisions to distribute limited resources, in markets where goods or services are being bought and sold.

Income Effect

the change in demand for a product caused by the impact of a change in its price affecting the spending power of the consumer.

Law of Demand

the higher the price of the product, the less the consumer will demand, n inverse relationship.

Marginal Utility

the increase in utility obtained by consuming or using one more unit of a good or service.

Profit

the making of gain in business activity for the benefit of the owners of the business, money left over after all expenses are paid.

Expenditures

the value of money that has been used up or spent to produce something.

Total Product

total output produced by a firm.

Raw Materials

unprocessed natural products used in production.

Marginal Cost

what is given up when one more unit of product is produced.