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Absolute Advantage
the ability to produce a good using fewer inputs than another producer
Accounting Profit
total revenue minus total cost of expenses
Allocative Efficiency
the particular mix of goods and services most highly valued by society
Capitalist Market System
A system in which individuals and businesses own and control the production of goods.
Monopoly
a market structure that consists of only one seller or one producer
Oligopoly
a market structure in which a small number of seller can produce and sell different products
Comparative Advantage
the ability to produce a good at a lower opportunity cost than another producer
Complementary Good
a product often used with another product
Comsumer Surplus
The difference between the maximum price and the actual price a customer pays
Producer Surplus
the difference between the lowest price a firm would be willing to accept and the price it actually receives
Demand
the quantity of a good or service that consumers are willing and able to buy at a certain price in a given period of time
Derived Demand
business demand that ultimately comes from the demand for consumer goods
Supply
The amount of goods available
Dominant Strategy
a strategy that is the best for a firm, no matter what strategies other firms use
Explicit Cost
normal costs of a business that can appear in a companies account log and can affect a company's profitability
Export
A good or service produced in the home country and sold in another country.
Free Rider
a person who receives the benefit of a good but avoids paying for it
Gini Ratio
A measure of income inequality (0 - perfect equality & 1 - perfect inequality)
Implicit Cost
The opportunity of using resources that a company already owns to produce a good
Imports
goods produced abroad and sold domestically
Income Elasticity
A measure of how much the demand for goods changes when people's income changes
Inferior Good
a good that consumers demand less of when their incomes increase
Law of Diminishing Marginal Returns
claims that by adding an additional factor of production it can result in smaller increases in output
Lorenz Curve
A graph that shows how much money/ wealth is held by different groups of people in a population
Marginal Analysis
A decision making tool that figures out if doing a little bit more or a little less, maximizes the benefits while minimizing production cost
Marginal Product of Labor
the additional output a firm produces as a result of hiring one more worker
Market Equilibrium
when the market supply is equal to the quantity demanded
Market Failure
a situation in which a market left on its own fails to assign resources efficiently
Negative Externality
a cost that is suffered by a third party as a result of an economic transaction
Opportunity Cost
the benefit that would have been derived from an option that was not chosen
Price Ceiling
the maximum amount a seller can charge for a product or service usually set by the government
Price Floor
the lowest legal price that companies can charge for a product, service, labor and financial capital
Progressive Tax
A tax that takes a larger percentage of income from people with higher incomes.
Protective Tariff
made to protect domestic production from foreign competition by raising the prices of the imported commodities
Quota
government-imposed trade restriction that is used to limit the number of goods that could be imported or exported in a country
Shortage
when a demand for a product or service is way past the amount that is supplied
Surplus
when the amount of goods surpasses the amount demanded by the economy
Gov. Subsidy
benefits given by the government to groups or individuals, which are usually given in forms of cash payments or tax reductions
Trade - Off
Giving up one thing for another
Note 
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