Economics

Economics

the study of proper allocation and efficient utilization of scarce productive resources

Microeconomics

branch of economics that deals with the behaviour of individual components

Macroeconomics

branch of economics that deals with the behaviour of the economy as a whole

Economic Theory

a preposition about certain related variables that scientifically explain a certain phenomenon

Economic Model

a simplified framework for describing the working of the economy

Circular Flow Diagrams

a basic model used in economics to show how an economy functions

Positive Economics

an economic analysis that explains what happens in the economy and why

Normative Economics

an economics statement that makes recommendation to economic policy

Production Possibility Frontier

a graphic representation of all possible combinations of two goods

Opportunity Cost

the next best alternative that you had to give up because you chose a particular option

Demand and Supply Analysis

analysis used to establish equilibrium prices and quantities within a market

Market

an institution or mechanism that brings together buyers and sellers for the purpose of exchange

Demand

quantities of a particular good or service that buyers will be willing and able to purchase at each price during a specific period

Law of Demand

the relationship between the price and quantity demanded

Law of Demand

represented as downward sloping in a graph and there is negative rs between the price and quantity demanded

Supply

quantities of a particular good or service that sellers are willing and able to sell over a certain period

Law of Supply

the relationship between the price and quantity supplied

Law of Supply

represented as upward sloping in a graph and there is a positive rs between the price and quantity supplied

Market Equilibrium

defined as a situation where for particular good, supply = demand which implies that all market forces are balanced or equal

Equilibrium Price

the point where the demand and supply curve intersect

Surplus

it is anywhere beyond the intersection and defined as the amount by which the quantity supplied exceeds the quantity demanded at the current price

Shortage

it is anywhere below the intersection and defined as the amount by which the quantity demanded exceeds the quantity supplied at the current price

Substitute Goods

serves as the same purpose as another good for consumers

Complementary Goods

adds value to another good when consumed together, hand in hand, or in tandem

Income

amount of money that individual or household receives

Disposable Income

income used by individuals to purchase goods and services the individual or household needs

Non-Disposable Income

it is not used by individual or household for their consumption

Normal Good

if the demand increase, it means the income increases

Inferior Goods

if the demand decrease, it means the income increases

Taste and Preference of Consumer

the behaviour of consumers which is affected by weather, perception, information, occasion, what is in, and others

Productivity

capacity of an input to produce output

Inputs

refers to the raw materials or factors of production needed to produce a certain product

Government Action

refers to the power of the government to intervene in the market and affect the supply

Subsidies

the incentive given by the government to motivate the producer to provide more products in the market

Taxes

power of the government to impose a certain percentage of amounts to a person and property

Regulations

power of the government to impose some rule to control some of political, administrative, and economic activity done within the vicinity of the state

Output

comprises the price of other commodity produced by firm

Expectation

this is the preview of the firms about the price of a commodity they are selling in the future

Size of Industry

refers to the number of sellers in the industry

Industry

groups of firms selling the same product

Supply curve

refers to all firms producing the product

Elasticity

measure of how much buyers and sellers respond to changes in market conditions

Elastic Goods

it has many substitues, competitive markets, high percentage of income, and is bought frequently

Inelastic Goods

has few/no substitutes, includes necessities, addictive, small percentage of income, and seasonal

Market Basket

a collection of one or more commodities

Utils

it is the unit of satisfaction

Marginal Utility

additional or extra utils the individual gains when he/she consumes additional unit of commodity

Saturation Point

point where the total utility curve is on its peak and the marginal utility is equal to 0

Indifference Curve

a hypothetical representation of combination of goods that gives the same satisfaction

Indifference Curve

represent how an individual value good with his/her personal preferences

Budget Line

the graphical representation of our budget constraints

MRS (Marginal Rate of Substitution)

the slope of indifference curves

Marginal Rate of Substitution

quantifies the amount of one good a consumer will give up to obtain more of another good

Constrained Optimization

it is where you are able to maximize your budget constraints

Point of Tendency

the “lapat” of indifference curve and budget line

Formula for Budget Line

Px (Qx) + Py (Qy)

Elastic

% change in demand is greater than the % change in price

Inelastic

% change in demand is less than % change in price

Perfectly Elastic

small rise in price results in fall in demand to zero/ small fall in price causes increase in demand to infinity

Perfectly Inelastic

no change produce in demand of the product with change in its price

Unit Elastic

% change in demand is equal to % change in price