Economics Definitions

Opportunity costs

Opportunity cost is the value of the next best alternative foregone when a choice is made.

Production Possibility Curve

Production Possibility Curve shows all combinations of the maximum quantities of 2 goods that can be produced by an economy with a given amount of resources fully and efficiently employed at a given state of technology in a given time period.

Productive Efficiency

Productive efficiency is when all available resources in an economy are fully and efficiently employed to achieve maximum output

Allocative efficiency

Allocative efficiency is the allocation of resources to produce the combination of goods and services most wanted by the society, maximising welfare

Marginal Private Benefit

Marginal private benefit is the additional utility derived from the consumption of an additional unit of goods and services.

Marginal Private cost

Marginal private cost is the additional cost incurred in the consumption of an additional unit of goods and services.

Marginal revenue

Marginal revenue is the additional revenue received by produces for the sale of an additional unit of goods and services.

Marginal cost

Marginal cost is the additional cost incurred on the production of an additional unit of goods and services

Demand

Demand is the quantity of goods and services that a consumer is willing and able to buy at various prices in a given period of time, ceteris paribus.

Law of Diminishing Marginal Utility

Law of Diminishing Marginal Utility states that beyond a certain point of consumption, as more and more units of good and service is consumed in a given period of time, the additional utility a consumer derives from the consumption of each additional unit decreases.

Law of Demand

Law of Demand states that there is an inverse relationship between price and quantity demanded for a good or service, ceteris paribus

Supply

Supply is the quantity of a good or service that a producer is willing and able to produce and sell at various prices in a given period of time, ceteris paribus.

Law of Supply

Law of Supply states that there is a direct relationship between price and quantity supplied of a good or service ceteris paribus

Consumer expenditure

Consumer expenditure is the total amount of money consumers spend on a good or service

Producer revenue

Producer revenue is the total amount of money producers receive from the sale of a good or service

Price Elasticity of Demand

Price Elasticity of Demand measure the responsiveness of quantity demanded of a good or service by consumers to a given change in price at a given period of time ceteris paribus

Price Elasticity of Supply

Price Elasticity of Supply measures the responsiveness of the quantity of supply of a good or service produced by firms to a given change in price ceteris paribus.

Allocative efficiency

Allocative efficiency occurs when resources are allocated to produce a combination of goods and services most wanted by the society, maximising its welfare.

Externality

Externality is the cost or benefits incurred on third parties due to the consumption or production of a good or service and is not taken into account by the producers or consumers