Intro to Micro

Scarcity

A situation where resources are not enough to satisfy all the wants of a society.

Resource

Anything that can be used to produce something else.

Opportunity Cost

What you must give up in order to get something.

Marginal Decision

A decision made at the margins of an activity about whether to do a bit more or less of that activity.

Incentive

Anything that offers rewards to people who change their behavior.

Equilibrium

An economic situation in which no individual would be better off doing something different.

Specialization

The situation in which a person specializes in a task that they are good at performing.

Efficiency

A situation where all opportunities to make some people better off without making others worse off have been fully exploited.

Market Failure

When the pursuit of self-interest leads to an outcome that is inefficient.

Economic Growth

The increase in living standards over time, often enabled by new technologies and increased resources.

Comparative Advantage

When a country or individual has a lower opportunity cost for producing a good compared to another.

Price Elasticity of Demand

The measure of how much the quantity demanded of a good responds to a change in its price.

Perfect Competition

A market structure characterized by many buyers and sellers where no single entity can influence the market price.

Monopoly

A market structure characterized by a single seller that controls the entire supply of a product or service.

Externality

A cost or benefit for a third party who did not agree to it, often resulting in market inefficiency.

Public Goods

Goods that are nonexcludable and nonrival in consumption, such as national defense.

Common Resources

Resources that are nonexcludable but rival in consumption, such as fisheries.

Artificially Scarce Goods

Goods that are excludable but nonrival in consumption, like on-demand movies.

Coase Theorem

The theory that private individuals can negotiate without cost over the allocation of resources, leading to efficient outcomes.

Pigouvian Tax

A tax intended to correct an inefficient market outcome, typically imposed on activities that generate negative externalities.

Network Externality

A situation in which the value of a good increases as more people use it.

Marginal Utility

The additional satisfaction a consumer gains from consuming one more unit of a good.

Deadweight Loss

A loss of economic efficiency due to market distortions like taxes or monopolies.

Game Theory

The study of mathematical models of conflict and cooperation between intelligent rational decision-makers.

Collusion

An agreement among firms to restrict output to increase prices and profits.

Price Discrimination

A pricing strategy in which different prices are charged for the same good or service.

Tradable Emissions Permits

Licenses that allow firms to emit a certain amount of pollutants, which can be traded among companies.