Micro Economics AQA A level key knowledge

Demand

Quantity consumers are willing and able to buy at a price in a time period.

Supply

Quantity producers are willing and able to sell at a price in a time period.

Equilibrium

Where demand equals supply.

Excess demand

Demand greater than supply, resulting in a shortage.

Excess supply

Supply greater than demand, resulting in a surplus.

Contraction of demand

Movement along the demand curve due to a price rise.

Extension of demand

Movement along the demand curve due to a price fall.

Increase in demand

Whole demand curve shifts right.

Decrease in demand

Whole demand curve shifts left.

Contraction of supply

Movement along the supply curve due to a price fall.

Extension of supply

Movement along the supply curve due to a price rise.

Increase in supply

Supply curve shifts right.

Decrease in supply

Supply curve shifts left.

Utility / Consumers

Satisfaction gained from consumption.

Diminishing marginal utility

Extra satisfaction from each additional unit falls.

Fixed costs

Costs that do not vary with output.

Variable costs

Costs that change with output.

Total cost

Fixed costs + variable costs.

Average cost

Total cost divided by output.

Marginal cost

Cost of producing one extra unit.

Total revenue

Price times quantity.

Average revenue

Revenue per unit, usually price.

Marginal revenue

Revenue from selling one extra unit.

Normal profit

Minimum profit needed to keep a firm in the market.

Supernormal profit

Profit above normal profit.

PED (Price Elasticity of Demand)

Responsiveness of demand to price change.

YED (Income Elasticity of Demand)

Responsiveness of demand to income change.

XED (Cross Elasticity of Demand)

Responsiveness of demand for one good to the price of another good.

PES (Price Elasticity of Supply)

Responsiveness of supply to price change.

Market failure

Resources allocated inefficiently.

Externality

Third party cost or benefit.

Social cost

Private cost + external cost.

Social benefit

Private benefit + external benefit.

Merit good

Underconsumed good with positive externalities.

Demerit good

Overconsumed good with negative externalities.

Public good

Non-rival and non-excludable good.

Information failure

Consumers lack full information.

Asymmetric information

One side knows more than another.

Perfect Competition

Many buyers and sellers, homogeneous products, free entry and exit.

Monopoly

One dominant seller, high barriers to entry, price maker.

Monopolistic Competition

Many firms with differentiated products and some price power.

Oligopoly

Few interdependent firms with barriers to entry.

Government intervention

May fail due to information gaps, time lags, enforcement costs, unintended consequences, and political pressure.

Stakeholders

Consumers, firms, workers, taxpayers, government.

Revenue Rule

Elastic demand, price falls, revenue rises.

Weak Area Fix

Simple chains score marks.

First 20 cards to memorize

Demand, Supply, Equilibrium, PED, YED, XED, PES, Externality, Market Failure, Merit Good, Public Good, Monopoly, Perfect Competition, Subsidy Effects, Tax Effects, Max Price, Min Price, Revenue and PED, Economies of Scale, Government Failure.

Writing structure for top marks

Define, Because, Therefore, However, Depends on.