Microeconomics Final Exam Review

A set of vocabulary flashcards covering key concepts, definitions, and principles in microeconomics, as outlined in the lecture notes.

Economics

The study of scarcity, choice, and opportunity costs as relative prices.

Microeconomics

The analysis of decision-making by consumers and firms and their interactions in markets.

Macroeconomics

The study of broad economic aggregates and the economy as a whole.

Positive Economic Statements

Statements that describe what is or facts.

Normative Economic Statements

Statements that express opinions or values about what ought to be.

Efficiency

The optimal use of resources to maximize output without wasting.

Production Efficiency

Maximum output given available resources, depicted on the production possibility frontier (PPF).

Allocative Efficiency

Resources are allocated in a manner that maximizes societal benefit, where marginal social benefit equals marginal social cost.

Opportunity Cost

The highest valued alternative that is forgone when making a decision.

Comparative Advantage

The ability to produce a good at a lower opportunity cost than another producer.

Absolute Advantage

The ability to produce more output per unit of input than another producer.

Law of Demand

The inverse relationship between price and quantity demanded.

Law of Supply

The positive relationship between price and quantity supplied.

Equilibrium Price

The price at which quantity demanded equals quantity supplied.

Surplus

Occurs when the quantity supplied exceeds the quantity demanded at a given price.

Shortage

Occurs when the quantity demanded exceeds the quantity supplied at a given price.

Price Elasticity of Demand

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

Consumer Surplus

The net benefit to consumers, calculated as the difference between what consumers are willing to pay and what they actually pay.

Producer Surplus

The net benefit to producers, calculated as the difference between the price received and the marginal cost of production.

Price Controls

Regulations that set maximum or minimum prices for goods and services.

Budget Constraint

The limitation on the consumption choices of individuals based on their income and the prices of goods.

Marginal Utility

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

Total Cost

The sum of total fixed costs and total variable costs.

Perfect Competition

A market structure characterized by many firms, identical products, and free entry and exit.

Monopoly

A market structure where a single seller dominates the market and sets prices.

Monopolistic Competition

A market structure with many firms selling differentiated products and free entrance and exit.

Oligopoly

A market structure dominated by a few large firms, where each firm's decisions affect the others.

Global Markets

International trade dynamics influenced by comparative advantages of national producers.