Microeconomics (pricing, profits and competition)

These flashcards cover key concepts related to microeconomic pricing, competition, and market structures.

Firm

An organization that produces goods or services.

Perfect Competition

A market structure with many firms, no single firm able to set price, easy entry and exit, and firms that are price takers.

Monopoly

A market structure dominated by one firm that has the power to set prices and high barriers to entry.

Oligopoly

A market structure characterized by a few large firms that compete strategically with high concentration and possible barriers to entry.

Creative Destruction

A concept by J.A. Schumpeter where new innovations destroy old competitors, leading to transformation in the market.

Price Elasticity of Demand (PED)

A measure of how sensitive demand is to changes in price.

Elastic Demand

Demand is considered elastic when PED > 1, meaning consumers are very responsive to price changes.

Inelastic Demand

Demand is inelastic when PED < 1, indicating that consumers are less responsive to price changes.

Total Revenue (TR)

The total money a firm earns from selling its output, calculated as TR = P × Q.

Marginal Cost (MC)

The cost of producing one more unit of a good.

Law of Diminishing Marginal Productivity

As more variable inputs are added to fixed inputs, the additional output generated by each additional input will eventually decrease.

Enshittification

The process by which platforms or businesses degrade in quality over time after initially attracting users.

Network Effects

The phenomenon where more users make a product more valuable, often seen in social media and online marketplaces.

Personalized Pricing

A pricing strategy where firms charge different prices to different consumers based on various data points.

Average Total Cost (ATC)

The total cost per unit, calculated as ATC = TC / Q.

Four-Firm Concentration Ratio

A measure of how much of the market is controlled by the four largest firms.