Basic Economic Concepts
The next best thing that you give up when making a decision.
What is opportunity cost?
The economic principle stating that as the price of a good or service increases, consumer demand typically decreases is known as this.
law of demand
This economic policy tool is used by governments to control inflation and ensure economic stability through manipulation of interest rates.
monetary policy
This market structure is characterized by a single seller dominating the market, with no close substitutes for the product.
monopoly
An increase in this economic indicator generally suggests growth in the economy, as it leads to more jobs.
employment
This principle states that every choice involves a trade-off, or the value of the next best alternative forgone.
opportunity cost
This term refers to the total market value of all final goods and services produced within a country in a given period.
Gross Domestic Product (GDP)
This term describes the additional satisfaction gained from consuming one more unit of a good or service.
What is marginal utility?
This occurs when the overall market supply cannot meet demand, often leading to shortages.
What is excess demand?
This type of unemployment occurs when workers' skills do not match the jobs available.
structural unemployment
This term describes the money available for spending after income taxes have been deducted.
disposable income
This is the situation when the quantity supplied of a good is equal to its quantity demanded.
market equilibrium
This economic model illustrates the relationship between production inputs and the quantity of output produced.
What is the production function?
In this type of competition, many firms sell similar but not identical products.
What is monopolistic competition?
In the context of microeconomics, this is the situation where individual consumers and firms make decisions that are best for themselves, often leading to inefficient outcomes.
What is market failure?
Also known as a subsidy, this government intervention helps to support businesses during economic hardship.
financial aid
The principle that as the price of a good increases, the quantity supplied increases.
Law of Supply
When a firm is operating at this level of output, it maximizes its profit.
What is marginal cost equals marginal revenue?
The market structure characterized by a few large firms that dominate the market and have some control over pricing.
What is oligopoly?
A graphical representation of the relationship between supply and demand, showing how prices are determined in a market.
What is the supply and demand curve?
This concept explains the common phenomenon where consumer demand decreases for a good when the price rises due to substitutes being available.
What is the substitution effect?
The term for a product's responsiveness in quantity demanded in relation to a change in price.
What is price elasticity of demand?
This is the additional cost incurred from the production of one more unit of output.
What is marginal cost?
A situation in which two or more firms compete on price and one firm undercuts the others is known as this type of competition.
What is price competition?
This principle states that as production increases, the cost of producing each additional unit will eventually rise.
What is the law of diminishing returns?