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    Economic Definitions

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    Hein Zayar

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    © All Rights Reserved
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    Economic Definitions

    Uploaded by

    Hein Zayar
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    2 views2 pages

    Economic Definitions

    Uploaded by

    Hein Zayar

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Economic Definitions

    1. Economics: The science that examines how people make choices in the face of limited
    resources to meet their unlimited wants.
    2. Microeconomics: The branch of economics that studies the behavior of individual
    consumers, firms, and industries, and how their interactions determine market outcomes.
    3. Market Equilibrium: A market clears when supply matches demand, leaving no
    shortage or surplus. The market is in equilibrium.
    4. Elasticity: The responsiveness of one variable (e.g. demand) to a change in another (e.g.
    price). This concept is fundamental to understanding how markets work. The more elastic
    variables are, the more responsive is the market to changing circumstances.
    5. Consumer Surplus: The difference between how much a consumer is willing to pay for
    a good and how much they actually pay for it.
    6. Producer Surplus: The profit or extra revenue that producers gain by selling a product at
    a price higher than their production cost.
    7. Marginal Cost: The additional cost of doing a little bit more (or 1 unit more if a unit can
    be measured) of an activity.
    8. Marginal Revenue (MR): The extra revenue gained by selling one or more units per
    time period: MR=DTR/DQ
    9. Fixed Cost: Total costs that do not vary with the amount of output produced.
    10. Variable Cost: Total costs that do vary with the amount of output produced.
    11. Market Failure: A situation where the market fails to allocate resources efficiently,
    leading to suboptimal outcomes.
    12. Market Economy: Market economy is an economy that allocates resources through the
    decentralized decisions of many firms and households as they interact in markets for
    goods and services.
    13. Trade off: The concept that to gain something, something else must be given up.
    14. Opportunity Cost: The value of the next best alternative that is foregone when a
    decision is made.
    15. Primary Production: The production and extraction of natural resources, plus
    agriculture.
    16. Secondary Production: The production from manufacturing and construction sectors of
    the economy.
    17. Tertiary Production: The production from the service sector of the economy.
    18. Equilibrium: A position of balance. A position from which there is no inherent tendency
    to move away.
    19. Law of demand: The quantity of a good demanded per period of time will fall as the
    price rises and rise as the price falls, other things being equal.
    20. Scarcity: The excess of human wants over what can actually be produced to fulfill these
    wants.
    21. U Form business organization: One in which the central organization of the firm(the
    chief executive or a managerial team) is responsible both for the firm’s day-to-day
    administration and for formulating its business strategy.
    22. M Form business organization: One in which the business is organized into separate
    departments, such that responsibility for the day-to-day management of the enterprise is
    separated from the formulation of the business’s strategic plan.
    23. Total Revenue: The total amount received by firms from the sale of a product, before the
    deduction of taxes or any other costs. The price multiplied by the quantity sold: TR=5
    P×Q.
    24. Free market: One in which there is an absence of government intervention. Individual
    producers and consumers are free to make their own economic decisions.
    25. Perfectly competitive market: A market in which all producers and consumers of the
    product are price takers.
    26. Price taker: A person or fi rm with no power to be able to influence the market price.
    27. Price mechanism: The system in a market economy whereby changes in price, in
    response to changes in demand and supply, have the eff ect of making demand equal to
    supply.

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