ECO402 Final Term Subjective

Eco402 - Microeconomics Glossary By

Break-even point : the point at which price equals the minimum of average total cost.

Externalities : the spillover effects of production or consumption for which no payment is made.

Inferior goods : items for which an increase in income results in a fall in the amount bought e.g. Bread, linoleum and coal.

Marginal physical product : the change in total product measured in physical terms caused by a one unit increase in a variable input.

Market supply curve : the horizontal summation of all the individual supply curves.

Monetary base : the same as "high-powered money": cash in commercial banks, plus cash in circulation and deposits of the commercial bank at the central bank.

Movement along the curve : a situation in which a change in the variable on one axis causes a change in the variable on the other axis, but maintains the position of the curve.

Mixed economy : a market economy in which the government plays a very large role.

Multiplier effect : the tendency for a change in aggregate spending to cause a more than proportionate change in the level of real national income.

Negatively related : a situation in which an increase in one variable is associated with a decrease in another variable (also called inversely related).

Net exports : the value of goods and services sold abroad minus the value of goods and services bought from the rest of the world – that is, exports minus imports.

Non-tariff barrier : any government action other than a tariff that reduces imports, such as a quota or a standard.

Normal profits : the amount of accounting profits when economic profits are equal to zero the amount of accounting profits when economic profits are equal to zero .

Normative economics : economic analysis that makes recommendations about economic policy. Opportunity cost : the value of the next-best forgone alternative that was not chosen because something else was chosen.

Pareto efficiency : a situation in which it is not possible to make someone better off without making someone else worse off.

Perfectly elastic supply : supply for which the price elasticity is infinite, indicating an infinite response of quantity supplied to a change in price and thereby a horizontal supply curve.

Perfectly inelastic demand : demand for which the price elasticity is zero, indicating no response to a change in price and therefore a vertical demand curve.

Perfectly inelastic supply : supply for which the price elasticity is zero, indicating no response of quantity supplied to a change in price and thereby a vertical supply curve.

Physical capital : the factories, improvements to cultivated land, machinery and other tools, equipment and structures used to produce goods and services.

Positive economics : economic analysis that explains what happens in the economy and why, without making recommendations about economic policy.

Positive externality : the situation in which benefits spill over onto someone not involved in producing or consuming the good.

Positive slope : a slope of a curve that is greater than zero, representing a positive or direct relationship between two variables.

Positively related : a situation in which an increase in one variable is associated with an increase in another variable (also called directly related).

Present discounted value : the value in the present of future payments.

Price : the amount of money or other goods that one must pay to obtain a particular good.

Price ceiling : a government price control that sets the maximum allowable price for a good.

Price control : a government law or regulation that sets or limits the price to be charged for a particular good.

Price elasticity of demand : the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good. Price elasticity of supply : the percentage change in quantity supplied divided by the percentage change in price.

Quantity supplied : the amount of a good that firms are willing to sell at a given price.

Relatively elastic : a situation in which the elasticity of one good is greater than the elasticity of another good.

Shift of the curve : a change in the position of a curve usually caused by a change in a variable not represented on either axis.

Specific tax : a tax that is proportional to the number of items sold.

Substitute : a good that has many of the same characteristics of, and can be used in place of, another good.

Substitution effect : the amount by which quantity demanded falls when the price rises, exclusive of the income effect.

Supply : a relationship between price and quantity supplied.

Supply curve : a graph of supply showing the upward-sloping relationship between price and quantity supplied.

Supply schedule : a tabular presentation of supply showing the price and quantity supplied of a particular good, all else being equal.

Surplus : the situation in which quantity supplied is greater than quantity demanded.

Tacit collusion : implicit or unstated cooperation of firms to make mutually beneficial pricing or production decisions.

Tariff : a tax on imports.

Taxable income : an individual’s income minus deductions.

Tax incidence : the allocation of the burden of the tax between buyer and seller.

Tax revenue : a tax rate times the amount subject to tax.

Terms of trade : quantity of imported goods a country can obtain in exchange for a unit of exported goods.