Introduction to Microeconomics – Prof. Rhodora G. Pagatpat

Vocabulary flashcards that capture the essential terms and definitions from the lecture on microeconomics.

Economics

The study of how society allocates scarce resources to satisfy unlimited human wants through production, distribution, and consumption of goods and services.

Scarcity

A condition in which human wants for goods, services, and resources exceed what is available.

Economic Agent

Any entity (household, firm, government, or central bank) that engages in economic activity such as buying, selling, producing, or regulating.

Household / Individual

The most basic economic agent; supplies labor, demands goods and services, and thereby influences prices and production.

Firm (Business)

An organization that combines labor, capital, and entrepreneurship to produce goods and services for profit.

Government (as agent)

Provides public goods and services, enforces regulations, and collects taxes, thereby influencing demand and supply in the economy.

Central Bank

A financial institution that manages a country’s money supply and interest rates and acts as lender of last resort.

Division of Labor

The separation of work into specialized tasks so workers can focus on what they do best, increasing productivity.

Specialization

Concentration on a narrow range of tasks or products where one has an advantage, leading to greater efficiency.

Economies of Scale

The phenomenon where average cost per unit falls as the level of production rises.

Trade

The exchange of goods and services, often enabled by specialization and markets.

Market

Any arrangement that allows buyers and sellers to exchange goods, services, or resources.

Economist

An expert who studies how resources relate to production output and analyzes choices at individual and societal levels.

Circular Flow Diagram

A model showing the movement of resources, goods, services, and money between households and firms.

Economic Model

A simplified representation (in words or math) used by economists to explain or predict economic phenomena.

Supply and Demand Model

A model illustrating how the price of a good is determined by the relationship between quantity supplied and quantity demanded.

Production Function Model

A model that relates inputs (e.g., labor and capital) to the resulting output, assuming diminishing returns as inputs rise.

Utility Maximization Model

A model in which consumers choose the combination of goods and services that provides the greatest utility within their budget.

Economic Utility

The total satisfaction or benefit a person gains from consuming a product or service.

Microeconomics

The branch of economics that studies choices of individual entities—one price, one product, one household, one business, or one industry.

Elasticity (Microeconomics)

A measure of how much one variable (such as quantity demanded) responds to a change in another variable (such as price).

Theory of Production

The study of efficient conversion of inputs into outputs within a firm or industry.

Cost of Production

The total expense of producing a good or service, evaluated through the prices of required resources.

Monopoly

A market structure where a single firm dominates and controls supply of a particular good or service.

Oligopoly

A market structure characterized by domination of a small number of firms in a particular industry.

Macroeconomics

The branch of economics that analyzes the economy as a whole, focusing on growth, inflation, unemployment, and national policies.

Growth in the Standard of Living

An increase in output per capita of a country over time, used as a macroeconomic health indicator.

Unemployment

The condition in which people who are willing and able to work cannot find jobs; low unemployment is a macro goal.

Inflation

A sustained increase in the general price level of goods and services in an economy.

Deflation

A sustained decrease in the general price level of goods and services in an economy.