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Choke price
Maximum price a buyer will pay to purchase an item.
Comparative advantage
When one agent can produce a specific good with less opportunity cost than another agent.
Unit elastic
The point where the elasticity is 1.
Price ceiling
A price limit set below the market leading to a shortage.
Price floor
A price minimum set above the market leading to a surplus.
Positive statements
Facts that can be proven true or false.
Normative statements
Opinion statements about what should be happening or decisions that an agent should make.
Scarcity
Goods have value because they exist in limited quantity.
Externalities
Decisions made by one party that affect a market they are not involved in, such as taxes and subsidies.
Subsidies
Handing over money to grow the market.
Opportunity cost
Benefits that have been forgone in order to produce more of a different good.
PPF
Production possibilities frontier.
Law of supply
The curve is always upward sloping.
Law of demand
The curve is always downward sloping.
Producer surplus
The difference between sellers' willingness to accept and the current market price.
Cross price elasticity of demand
Responsiveness of how the change in the price of one good affects the quantity demanded of another good.
Absolute advantage
When one agent is more productive than another agent at a task.
Fixed cost
Supply side costs that are unaffected by the quantity supplied of the product.
Variable cost
Cost that is dependent on the quantity of what you are producing.
Perfectly inelastic demand
Demand curve is represented by a vertical line.
Nash equilibrium
A type of equilibrium in which no agent could be better off by making a different decision.
Diminishing marginal returns
Depletion of additional benefits, explaining the curved shape of a combined PPF.
Supply/demand schedule
Supply and demand curve in table format.
Income elasticity
The percentage change in quantity divided by the percentage change in income.
Optimization in differences
Focusing on change in marginal benefits is an optimization technique.
Pareto efficient market
A market with no externalities and no monopoly power where resources are allocated efficiently.
Cross price elasticity is negative
Indicates that the two goods are complements.
