Term
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Definition
| A system in which scarce resources are allocated among competing uses |
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Term
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Definition
| Resources used to produce goods and services; frequently divided into the basic categories of land, labour, and capital |
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Term
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Definition
| Tangible commodities, such as cars or shoes |
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Term
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Definition
| Intangible commodities, such as haircuts or medical care |
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Term
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Definition
| The act of making goods or services |
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Term
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Definition
| The act of using goods or services to satisfy wants |
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Term
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Definition
| The cost of using resources for a certain purpose, measured by the benefit given up by not using them in their best alternative use |
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Term
| Production Possibilites Boundary |
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Definition
| A curve showing which alternative combinations of commodities can just be attained if all available resources are used efficiently; it is the boundary between attainable and unattainable output combinations |
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Term
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Definition
| The allocation of an economy's scarce resources of land, labour and capital among alternative uses |
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Term
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Definition
| The study of the causes and consequences of the allocation of resources as it is affected by the workings of the price system |
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Term
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Definition
| The study of the determination of economic aggregates such as total output, the price level, employment and growth |
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Term
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Definition
| The specialization of individual workers in the production of particular goods or services |
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Term
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Definition
| The breaking up of a production process into a series of specialized tasks, each done by a different worker |
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Term
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Definition
| An economic system in which goods and services are traded directly for other goods and services |
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Term
| Transnational Corporations (TNCs) |
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Definition
| Firms that have operations in more than one country. Also called Multinational Enterprises (MNEs) |
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Definition
| An economy in which behaviour is based mostly on tradition |
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Term
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Definition
| An economy in which most economic decisions are made by a central planning authority |
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Term
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Definition
| An economy in which most economic decisions are made by private households and firms |
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Term
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Definition
| An economy in which some economic decisions are made by firms and households and some by the government |
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Term
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Definition
| A statement about what ought to be as opposed to what actually is |
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Term
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Definition
| A statement about what actually is (was or will be), as opposed to what ought to be |
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Term
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Definition
| Any well-defined item, such as the price or quantity of a commodity, that can take on various specific values |
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Term
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Definition
| A variable that is explained within a theory. Sometimes called an induced variable or a dependent variable |
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Term
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Definition
| A variable that is determined outside the theory. Sometimes called an autonomous variable or an independent variable |
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Term
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Definition
| A term used in several related ways: sometimes for an abstraction designed to illustrate some point but not designed to generate testable hypotheses, and sometimes as a synonym for theory |
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Term
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Definition
| An average that measures change over time of such variables as the price level and industrial production; conventionally expressed as a percentage relative to a base period, which is assigned the value 100 |
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Term
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Definition
| A set of observations made at the same time across several different units (such as households, firms or countries) |
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Term
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Definition
| A set of observations made at successive periods of time |
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Term
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Definition
| A graph of statistical observations of paired values of two variables, one measured on the horizontal and the other on the vertical axis. Each point on the coordinate grid represents the values of the variables for a particular unit of observation |
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Term
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Definition
| The amount of a good or service that consumers want to purchase during some time period |
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Term
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Definition
| A table showing the relationship between quantity demanded and the price of a commodity, other things being equal |
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Term
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Definition
| The graphical representation of the relationship between quantity demanded and the price of a commodity, other things being equal |
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Term
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Definition
| The entire relationship between the quantity of a commodity that buyers want to purchase and the price of that commodity, other things being equal |
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Term
| Substitutes in Consumption |
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Definition
| Goods that can be used in place of another good to satisfy similar needs or desires |
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Term
| Complements in Consumption |
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Definition
| Goods that tend to be consumed together |
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Term
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Definition
| A change in the quantity demanded at each possible price of the commodity, represented by a shift int he whole demand curve |
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Term
| Change in Quantity Demanded |
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Definition
| A change in the specific quantity of the good demanded, represented by a change from one point on a demand curve to another point, either on the original demand curve or on a new one |
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Term
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Definition
| The amount of a commodity that producers want to sell during some time period |
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Term
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Definition
| A table showing the relationship between quantity supplied and the price of a commodity, other things being equal |
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Term
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Definition
| The graphical representation of the relationship between quantity supplied and the price of a commodity, other things being equal |
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Term
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Definition
| The entire relationship between the quantity of some commodity that producers wish to sell and the price of that commodity, other things being equal |
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Term
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Definition
| A change in the quantity supplied at each possible price of the commodity, represented by a shift in the whole supply curve |
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Term
| Change in Quantity Supplied |
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Definition
| A change in the specific quantity supplied, represented by a change from one point on a supply curve to another point, either on the original supply curve or on a new one |
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Term
| Change in Quantity Supplied |
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Definition
| A change in the specific quantity supplied, represented by a change from one point on a supply curve to another point, either on the original supply curve or on a new one |
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Term
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Definition
| Any situation in which buyers and sellers can negotiate the exchange of goods or services |
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Term
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Definition
| A situation in which, at the given price, quantity demanded exceeds quantity supplied |
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Term
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Definition
| A situation in which, at the given price, quantity supplied exceeds quantity demanded |
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Term
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Definition
| The price at which quantity demanded equals quantity supplied. Also called the market-clearing price |
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Term
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Definition
| A price at which quantity demanded does not equal quantity supplied |
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Term
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Definition
| A situation in a market in which there is excess demand or excess supply |
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Term
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Definition
| The derivation of predictions by analyzing the effect of a change in some exogenous variable or the equilibrium |
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Term
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Definition
| The amount of money that must be spent to acquire one unit of a commodity. Also called money price. |
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Term
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Definition
| The amount of money that must be spent to acquire one unit of a commodity. Also called money price. |
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Term
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Definition
| The ratio of the money price of one commodity tot he money price of another commodity; that is, a ratio of two absolute prices |
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Term
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Definition
| The ratio of the money price of one commodity tot he money price of another commodity; that is, a ratio of two absolute prices |
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Term
| Price Elasticity of Demand (n) |
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Definition
| A measure of the responsiveness of quantity demanded to a change in the commodity's own price |
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Term
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Definition
| Following a given percentage change in price, there is a smaller percentage change in quantity demanded; elasticity less than 1 |
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Term
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Definition
| Following a given percentage change in price, there is a greater percentage change in quantity demanded; elasticity less than 1 |
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Term
| Price Elasticity of Supply (ns) |
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Definition
| A measure of the responsiveness of quantity supplied to a change in the product's own price |
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Term
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Definition
| A tax on the sale of a particular commodity |
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Term
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Definition
| The location of the burden of a tax - that is, the identity of the ultimate bearer of the tax |
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Term
| Income Elasticity of demand (ny) |
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Definition
| A measure of the responsiveness of quantity demanded to a change in income |
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Term
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Definition
| A good for which quantity demanded rises as income rises - its income elasticity is positive |
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Term
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Definition
| A good for which quantity demanded falls as income rises - its income elasticity is negative |
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Term
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Definition
| Products for which the income elasticity of demand is positive but less than 1 |
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Term
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Definition
| Products for which the income elasticity of demand is positive and greater than 1 |
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Term
| Cross Elasticity of Demand (nxy) |
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Definition
| A measure of the responsiveness of the quantity of one commodity demanded to changes in the price of another commodity |
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Term
| Partial-Equilibrium Analysis |
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Definition
| The analysis of a single market in isolation, ignoring any feedbacks that may come from induced changes in other markets |
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Term
| General-Equilibrium Analysis |
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Definition
| The analysis of all the economy's markets simultaneously, recognizing the interactions among the various markets |
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Term
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Definition
| Allocation of commodities in excess demand by decisions of the sellers |
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Term
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Definition
| A situation in which goods are sold illegally at prices that violate a legal price control |
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Term
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Definition
| The satisfaction or well-being that a consumer receives from consuming some good or service |
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Term
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Definition
| The total satisfaction resulting from the consumption of a given commodity by a consumer |
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Term
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Definition
| The additional satisfaction obtained from consuming one additional unit of a commodity |
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Term
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Definition
| Income expressed in terms of the purchasing power of money income - that is, the quantity of goods and services that can be purchased with the money income |
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Term
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Definition
| The change in the quantity of a good demanded resulting from a change in its relative price (holding real income constant) |
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Term
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Definition
| The change in the quantity of a good demanded resulting from a change in real income (holding relative prices constant) |
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Term
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Definition
| An inferior good for which the income effect outweighs the substitution effect so that the demand curve is positively sloped |
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Term
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Definition
| The difference between the total value that consumers place on all units consumed of a commodity and the payment that they actually make to purchase the amount of the commodity |
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Term
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Definition
| A firm that has one owner who is personally responsible for the firm's actions and debts |
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Term
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Definition
| A firm that has two or more joint owners, each of whom is personally responsible for the firm's actions and debts |
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Term
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Definition
| A firm that has two classes of owners: general partners, who take part in managing the firm and are personally liable for the firm's actions and debts, and limited partners, who take no part in the management of the firm and risk only the money that they have invested |
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Term
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Definition
| A firm that has a legal existence separate from that of the owners |
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Term
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Definition
| A firm that is owned by the government. In Canada, these are called Crown Corporations |
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Term
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Definition
| Firms that provide goods and services with the objective of just covering their costs. These are often called NGOs, for non-governmental organizations |
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Term
| Multinational Enterprises (MNEs) |
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Definition
| Firms that have operations in more than one country |
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Term
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Definition
| Profits paid out to shareholders of a corporation |
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Term
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Definition
| A debt instrument carrying a specified amount, a schedule of interest payments, and (usually) a date for redemption of its face value |
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Term
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Definition
| All outputs that are used as inputs by other producers in a further stage of production |
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Term
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Definition
| A functional relation showing the maximum output that can be produced by any given combination of inputs |
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Term
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Definition
| The difference between the revenues received from the sale of output and the opportunity cost of the inputs used to make the output. Negative economic profits are called economic losses |
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Term
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Definition
| A period of time in which the quantity of some inputs cannot be increased beyond the fixed amount that is available |
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Term
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Definition
| An input whose quantity cannot be changed in the short run |
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Term
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Definition
| An input whose quantity can be changed over the time period under consideration |
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Term
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Definition
| A period of time in which all inputs may be varied, but the existing technology of production cannot be changed |
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Term
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Definition
| A period of time that is long enough for the technological possibilities available to a firm to change |
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Term
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Definition
| Total amount produced by a firm during some time period |
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Term
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Definition
| Total product divided by the number of units of the variable factor used in its production |
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Term
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Definition
| The change in total output that results from using one more unit of a variable factor |
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Term
| Law of Diminishing Returns |
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Definition
| The hypothesis that if increasing quantities of a variable factor are applied to a given quantity of fixed factors, the marginal product of the variable factor will eventually decrease |
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Term
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Definition
| The total cost of producing any given level of output; it can be divided into total fixed cost and total variable cost |
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Term
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Definition
| All costs of production that do not vary with the level of output |
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Term
| Total Variable Cost (TVC) |
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Definition
| Total costs of production that vary directly with the level of output |
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Term
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Definition
| Total cost of producing a given output divided by the number of units of output; it can also be calculated as the sum of average fixed costs and average variable costs. Also called unit cost or average cost. |
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Term
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Definition
| Total fixed costs divided by the number of units of output |
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Term
| Average Variable Cost (AVC) |
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Definition
| Total variable costs divided b the number of units of output |
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Term
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Definition
| The increase in total cost resulting from increasing output by one unit |
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Term
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Definition
| When a given number of inputs are combined in such a way as to maximize the level of output |
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Term
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Definition
| An implication of profit maximization that firms choose the production method that produces any given level of output at the lowest possible cost |
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Term
| Principle of Substitution |
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Definition
| The principle that methods of production will change if relative prices of inputs change with relatively more of the cheaper input and relatively less of the more expensive input being used |
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Term
| Long-Run Average Cost Curve (LRAC) |
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Definition
| The curve showing the lowest possible cost of producing each level of output when all inputs can be varied |
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Term
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Definition
| Reduction of long-run average costs resulting from an expansion in the scale of a firm's operations so that more of all inputs is being used |
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Term
| Increasing Returns (to scale) |
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Definition
| A situation in which output increases more than in proportion to inputs as the scale of a firm's production increases. A firm in this situation is a decreasing-cost firm |
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Term
| Minimum Efficient Scale (MEC) |
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Definition
| The smallest output at which LRAC reaches its minimum. All available economies of scale have been realized at this point |
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Term
| Constant Returns (to scale) |
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Definition
| A situation in which output increases in proportion to inputs as the scale of production is increased. A firm in this situation is a constant-cost firm |
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Term
| Decreasing Returns (to scale) |
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Definition
| A situation in which output increases less than in proportion to inputs as the scale of a firm's production increases. A firm in this situation is an increasing-cost firm. |
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Term
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Definition
| Any change in the available techniques of production |
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Term
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Definition
| Output produced per unit of some input; frequently used to refer to labour productivity, measured by total output divided by the amount of labour used |
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Term
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Definition
| All features of a market that affect the behaviour and performance of firms in that market, such as the number and size of sellers, the extent of knowledge about one another's actions, the degree of freedom of entry, and the degree of product differentiation |
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Term
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Definition
| The ability of a firm to influence the price of a product or the terms under which it is sold |
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Term
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Definition
| A market structure in which all firms in an industry are price takers and in which there is freedom of entry into and exit from the industry |
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Term
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Definition
| In the eyes of the purchasers, every unit of the product is identical to every other unit |
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Term
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Definition
| A firm that can alter its rate of production and sales without affecting the market price of its product |
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Term
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Definition
| Total receipts from the sale of a product; price times quantity |
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Term
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Definition
| Total revenue divided by quantity sold; this is the market price when all units are sold at the same price |
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Term
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Definition
| The change in a firm's total revenue resulting from a change in its sales by one unit |
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Term
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Definition
| The price that is equal to the minimum of a firm's average variable costs. At prices below this, a profit-maximizing firm will shut down and produce no output |
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Term
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Definition
| For a competitive industry, the price and output at which industry and demand equals short-run industry supply, and all firms are maximizing their profits. Either profits or losses for individual firms are possible |
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Term
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Definition
| The price at which a firm is just able to cover all of its costs, including the opportunity cost of capital |
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Term
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Definition
| A market containing a single firm |
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Term
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Definition
| A firm that is the only seller in a market |
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Term
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Definition
| Any barrier to the entry of new firms into an industry. An entry barrier may be natural or created |
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Term
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Definition
| An industry characterized by economies of scale sufficiently large that only one firm can cover its costs while producing at its minimum efficient scale |
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Term
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Definition
| An organization of producers who agree to act as a single seller in order to maximize joint profits |
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Term
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Definition
| The sale by one firm of different units of a commodity at two or more different prices for reasons not associated with differences in cost |
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Term
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Definition
| The fraction of total market sales (or some other measure of market activity) controlled by a specific number of the industry's largest firms |
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Term
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Definition
| A group of commodities that are similar enough to be called the same product but dissimilar enough that all of them do not have to be sold at the same price |
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Term
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Definition
| A firm that faces a downward-sloping demand curve for its product. It chooses which price to set |
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Term
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Definition
| Market structure of an industry in which there are many firms and freedom of entry and exit but in which each firm has a product somewhat differentiated from the others, giving it some control over its price |
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Term
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Definition
| The property of long-run equilibrium in monopolistic competition that firms produce on the falling portion of their long-run average cost curves. This results in excess capacity, measured by the gap between present output and the output that coincides with minimum average cost |
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Term
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Definition
| An industry that contains two or more firms, at least one of which produces a significant portion of the industry's total output |
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Term
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Definition
| Behaviour designed to take account of the reactions of one's rivals to one's own behaviour |
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Term
| Cooperative (Collusive) Outcome |
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Definition
| A situation in which existing firms cooperate to maximize their joint profits |
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Term
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Definition
| An industry outcome reached when firms maximize their own profit without cooperating with other firms |
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Term
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Definition
| The theory that studies decision making in situations in which one player anticipates the reactions of other players to its own actions |
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Term
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Definition
| An equilibrium that results when each firm in an industry is currently doing the best that it can, given the current behaviour of the other firms in the industry |
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Term
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Definition
| An agreement among sellers to act jointly in their common interest. Collusion may be overt or covert, explicit or tacit |
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Definition
| An economy that engages in international Trade |
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Term
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Definition
| An economy that has no foreign trade |
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Term
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Definition
| The increased output attributable to the specialization according to comparative advantage that is made possible by trade |
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Term
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Definition
| The situation that exists when one country can produce some commodity at a lower absolute cost than another country |
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Term
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Definition
| The situation that exists when a country can produce a good with less forgone output of other goods than can another country |
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Term
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Definition
| The reduction in unit costs that often results as workers learn through repeatedly performing the same tasks. It causes a downward shift in the average cost curve |
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Term
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Definition
| The ration of the average price of a country's exports to the average price of its imports |
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