IB Economics (Microeconomics)

Demand

The willingness and ability of consumers to purchase a quantity of a good or service at a given price, in a given time period

Law of Demand

States that as the price of a good falls, the quantity demanded will normally increase

Supply

The willingness and ability of producers to produce a quantity of a good or service at a given price, in a given time period

Law of Supply

States that as the price of a good rises, the quantity supplied will normally increase

Market Power

The ability of a firm to raise and maintain price above the perfectly competitive level

Perfect Competition

A market structure where there are many small firms, producing identical products that are incapable of affecting the marker supply curve

Monopoly

A market structure where there is a single supplier of a good or service, thus having the power to influence the market supply and price

Oligopoly

A market structure where a few large firms dominate the industry

Non-collusive oligopoly

A form of oligopolistic market in which firms act independently, rather than colluding to act as a monopolist

Monopolistic Competition

A market structure where there are many firms, but each firm has only a small degree of market power

Allocative Efficiency

The socially optimal situation that occurs when resources are distributed in such a way that consumers and producers get the maximum possible benefit

Market Failure

Occurs when the free market fails to allocate resources in a way where community surplus is maximized

Asymmetric Information

Missing, unbalanced or incorrect information that exists when one economic agent has more information that the other in an economic transaction