Download Economics Glossary: Terms Related to Markets, Supply, and Demand and more Quizzes Microeconomics in PDF only on Docsity! TERM 1 PPF DEFINITION 1 is acurvedepicting all maximum outputpossibilitiesfor two goods, given a set of inputs consisting of resources and other factors TERM 2 Opportunity Cost DEFINITION 2 the loss of potential gain from other alternatives when one alternative is chosen TERM 3 Comparative advantage DEFINITION 3 ability to produce goods/service at a lower opportunity cost TERM 4 Market DEFINITION 4 any place or mechanism that brings together buyers and sellers to exchange goods/services TERM 5 The invisible hand DEFINITION 5 Adam Smith 1776, invisible force that makes buyers and sellers agree on a fair price TERM 6 law of demand DEFINITION 6 a principle in econ which states that as the price of a good, service, or resource rises the quantity demanded will decrease and vice versa TERM 7 Reasons for demand sloping down DEFINITION 7 income effectdiminishing marginal utilitysubstitution effect TERM 8 Income effect DEFINITION 8 Shows relation between price of good to purchasing TERM 9 DMU DEFINITION 9 less benefit from each unit earned TERM 10 market demand curve DEFINITION 10 is individual demand curves added together TERM 21 Market Equilibrium DEFINITION 21 Demand and Supply curve intersect TERM 22 Disequilibriums DEFINITION 22 Surplus and shortages TERM 23 Shortages DEFINITION 23 Any price below equilibrium price TERM 24 surplus DEFINITION 24 Above equilibrium price TERM 25 Decrease in supply DEFINITION 25 Equilibrium price increasesEquilibrium quantity decreases TERM 26 Increase in supply DEFINITION 26 equilibrium price decreasesEquilibrium Quantity increasesPrice decreases, quantity increases TERM 27 Price ceiling DEFINITION 27 A maximum legal price at which a good, service, or resource can be sold TERM 28 Price Floor DEFINITION 28 a minimum legal price at which a good, service, or resource can be soldquantity demand decreases TERM 29 Consumer Surplus DEFINITION 29 difference between the maximum price consumers are willing to pay for a good or service and the price they actually paidEverything below the demand curve and above the price TERM 30 Producer Surplus DEFINITION 30 The difference between the price producers receive for a good or service and the minimum price they are willing to acceptBenefits the producerEverything above the supply curve and below the price TERM 31 Economic surplus DEFINITION 31 The sum of the consumer and producer surplus TERM 32 Deadweight Loss DEFINITION 32 The value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium TERM 33 Private Market DEFINITION 33 Investments not traded on a public exchange or market TERM 34 Private Marginal Cost DEFINITION 34 The cost to the producer of an additional unit of a good or service TERM 35 Private Marginal Benefit DEFINITION 35 Benefit to the consumer of an additional unit of a good or service
