Microeconomics definitions

diminishing marginal utility

the more a product is consuemd the less satisfaction consumers get, making them only willing to buy it at a lower price

diminishing marginal returns

as more factors of production are utilized, each aditional unit brings declining returns

price elasticity of demand

measure of how quantity demanded changes based on price

income elasticity of demand

measure of how quantity demanded changes based on income

Government failure

when government intervention causes more social costs than benefits

MPB

the additional value gained by households or firms when consuming/producing an extra unit

MPC

the additional cost incurred by households or firms when consuming/producing an extra unit

MSB

the additional value gained by society when consuming/producing an extra unit

MSC

the additional cost incurred by society when consuming/producing an extra unit

positive externality

the benefit of a good or service experienced by a third party not directly involved in an economic transaction

negative externality

the cost of a good or service experienced by a third party not directly involved in an economic transaction

perfect competition

a market where many firms hold no market power, low barriers to entry, and differentiated products

monopoloistic competition

a market where many firms hold little market power, low barriers to entry, and differentiated products

oligopoloy

few large firms with significant market power, high barriers to entry, and differentiated products

collusive oligopoly

a market where oligopolistic firms engage in practices to restrict competition by price fixing or limiting output

monopoly

a market structure with one large firm holding all market poewr, high barriers to entry, and no close substitute products