Micro Ch 03 | The Law of Supply

Opportunity Cost

The value of the best alternative forgone when making a decision.

Marginal Cost

The additional opportunity cost of giving up increasingly valuable alternatives as more resources are supplied.

Trade-Offs

The concept of sacrificing one option to pursue another.

Marginal Benefit

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

Demand

The willingness and ability of consumers to purchase goods or services at various prices.

Supply

The willingness and ability of producers to offer goods or services at various prices.

Business Costs

The opportunity costs of inputs used in production, reflecting their best alternative uses.

Inputs

Resources such as labor, materials, and capital used in the production process.

Resources

Economic inputs used to produce goods and services, including labor, capital, and natural resources.

Price

The monetary value assigned to a good or service in a market.

Alternatives

Different options or choices available in decision-making.

Economic Value

The worth of a good or service based on its ability to satisfy needs or wants.

Sacrifice

The act of giving up something valuable to pursue another option.

Wages

The monetary compensation paid to employees for their labor.

Rent

The payment made for the use of land, property, or other assets.

Sunk Costs

Past expenses that cannot be recovered or reversed and are irrelevant for future decisions.

Future Benefits

Advantages or gains expected to occur as a result of a decision or action.

Future Costs

Expenses or losses anticipated to occur as a result of a decision or action.

Opportunity Costs

The value of the next best alternative foregone when making a decision.

Lease

A contractual agreement where one party rents property or assets from another for a specified period.

Tuition

The fee paid for instruction or education, typically at a school or university.

Decision-Making

The process of choosing between alternatives based on future benefits and costs.

Irrelevant Costs

Expenses that do not affect the outcome of a decision and should be ignored.

Smart Choices

Decisions made by focusing on future benefits and opportunity costs rather than sunk costs.

Expenses

Costs incurred in the process of acquiring goods or services.

Benefits

Positive outcomes or advantages gained from a decision or action.

Business Expansion

The process of growing a business by increasing its operations or market reach.

Employees

Individuals hired to perform work or services for a business or organization.

Costs

The monetary value of resources used or spent to achieve a goal or acquire something.

History

Past events or actions that are no longer relevant for current decision-making.

Law of Supply

States that as the price of a product or service increases, the quantity supplied also increases.

Quantity Supplied

The specific amount of a product or service businesses plan to sell at a given price.

Supply

The overall willingness of businesses to sell a product or service, considering all factors affecting production.

Opportunity Costs

The value of the next best alternative given up when making a decision.

Marginal Opportunity Costs

The additional cost of giving up one good or service to produce an additional unit of another.

Production Possibilities Frontier (PPF)

A curve showing the maximum combinations of two goods or services that can be produced with available resources.

Supply Curve

A graph showing the relationship between price and quantity supplied.

Marginal Cost Curve

A graph showing the minimum price needed to cover costs for each additional unit produced.

Trade-Offs

The concept of giving up one thing to gain something else.

Incentives

Factors that motivate businesses or individuals to act in a certain way.

Resources

Inputs used in the production of goods and services, such as labor, capital, and materials.

Profits

The financial gain obtained when revenue exceeds costs.

Price

The amount of money required to purchase a good or service.

Production

The process of creating goods or services using resources.

Factors of Production

The inputs used to produce goods and services, including land, labor, and capital.

Law of Supply

As the price of a product rises, the quantity supplied increases, and vice versa.

Supply Curve

A graph showing the relationship between the price of a product and the quantity supplied.

Change in Quantity Supplied

Movement along the supply curve due to a change in the product's price.

Change in Supply

A shift of the entire supply curve due to factors other than price.

Technology

Advancements that reduce production costs and increase supply.

Prices of Related Products

The impact of the price changes of one product on the supply of another.

Prices of Inputs

Costs of resources used in production, affecting supply levels.

Expected Future Prices

Anticipated changes in prices that influence current supply decisions.

Number of Businesses

The total number of firms in a market, affecting overall supply.

Environment

External factors like weather or pandemics that impact production and supply.

Rightward Shift

An increase in supply at every price level.

Leftward Shift

A decrease in supply at every price level.

Marginal Opportunity Costs

The cost of producing one additional unit of a product.

Supply Chain Disruptions

Interruptions in the flow of goods and materials, reducing supply.

Bumper Crops

Exceptionally large harvests that increase supply.