Microeconomics: Revenue, Demand, and Forecasting

These vocabulary flashcards cover fundamental microeconomic concepts including opportunity cost, revenue types, market structures, various elasticities of demand, and demand forecasting methodologies.

Opportunity Cost

The sacrifice of one commodity for the production of another, or the value of the next best alternative.

Total Revenue (TR)

The total sales receipts calculated as $Q \times P$ (Quantity sold multiplied by Price).

Average Revenue (AR)

The revenue per unit of commodity sold, calculated as $\frac{TR}{Q}$, which also equals the price (P).

Marginal Revenue (MR)

The addition made to total revenue by selling one more unit of a commodity.

Perfect Competition

A market structure characterized by a large number of buyers and sellers, a homogeneous product, and where the seller is a price taker.

Monopoly

A market structure with a single seller who is a price maker and faces a downward-sloping demand curve.

Marginalism

A concept referring to an "additional" or "extra unit," such as the increase in utility or revenue from consuming or selling one more unit.

Incrementalism

A concept referring to changes that take place in reality in the form of batches or chunks, rather than small individual units.

Price Elasticity of Demand ($E_p$)

The percentage change in quantity demanded divided by the percentage change in price, calculated as $\frac{\Delta Q}{Q} \times \frac{P}{\Delta P}$.

Relatively Inelastic Demand

A situation where the price elasticity of demand ($E_p$) is less than 1 ($E_p < 1$).

Equilibrium Price

The price level where the demand curve ($DD$) and the supply curve ($SS$) intersect.

Income Elasticity of Demand ($E_y$)

The responsiveness of quantity demanded due to a change in the income of the consumer, calculated as the percentage change in quantity demanded over the percentage change in income.

Negative Income Elasticity

A case occurring with inferior goods where a rise in income leads to a fall in demand as consumers transfer to superior goods.

Cross Elasticity of Demand ($C_P$)

The responsiveness of the quantity demanded for one commodity (e.g., Tea) to a change in the price of another commodity (e.g., Coffee).

Promotional Elasticity of Demand ($E_A$)

The percentage change in quantity demanded divided by the percentage change in advertisement expenditure.

Demand Forecasting

The estimation or approximation of future demand for a product or service.

Gestation Period

The long time period required for the production of certain goods, making demand forecasting necessary to avoid overproduction or underproduction.

Inventory

The stock of raw materials, semi-finished goods, or intermediate goods required for production.

Expert Opinion Method

A forecasting method where a market opinion poll is conducted with experts who have worked in the market for a long period to learn about consumer behavior.

Complete Enumeration Method (Census)

A consumer survey method involving interviewing all consumers of a product to know their probable demand.

Sample Method

A forecasting method where only a few consumers are contacted to determine their probable demand, which is then multiplied by the total population.

End-use Method

A method where demand is calculated by adding the consumption of a commodity as a final good, an intermediate good by industries, and its export/import balance.