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1
Term
Assumptions
1
Bads
1
Capital
1
Ceteris paribus
1
Constant
1
Definition
1
Econometrics
1
Economic
forecast
1
Economic model
1
Economic
prediction
Definition
Statements of the
conditions under
which a model
will work
Things that are
not wanted and do
not give any
satisfaction
Produced means of
production; the
productive factor
of production
defined as all
human-made means
of production; it
includes the
stock of
machinery,
equipment,
buildings, human
skills, and so on
Other things
being equal;
allows for the
investigation of
the effects of
one variable
while assuming
that others
remain constant
Anything that
remains unchanged
A set of words
that explain the
meaning of a term
or concept
The use of
statistical
methods to test
economic
hypotheses
The assignment of
a future value to
a variable
A simplification
of economic
reality
A statement of
the general
direction of a
variable
resulting from
the fulfillment
of certain
conditions
Sound
1
Economics
1
Endogenous
variable
1
Entrepreneurship
1
Exogenous
variable
1
Financial
capital
1
Flow
1
Goods
1
Human capital
1
Hypothesis
1
Income and
employment
theory
1
Interest and
dividends
Labour
1
The social
science that
studies how
people use scarce
resources to
satisfy their
unlimited wants
A variable whose
value is
determined within
a given model
The organization
of land, labour,
and capital into
production; the
risk-taking
aspect of
business decision
making
A variable whose
value is
determined by
factors outside a
given model
Money, as opposed
to real capital
(machinery,
equipment, tools,
etc.)
A change in a
stock over time
Tangible things
that satisfy
wants
Education,
training, skills,
health, and so
on, that improve
the quality of
labour
A statement of
suspected
relationships
among two or more
variables
A model or theory
that explains how
the macroeconomy
functions; also
called
macroeconomic
theory
Income from
capital
Human physical
and mental
1
Land
1
Macroeconomics
1
Microeconomics
1
Normative
economics
1
Normative
statements
Positive
economics
1
1
1
Positive
statements
Post hoc fallacy
1
Price theory
1
Profit
1
1
Rent
Resources
efforts
All natural
resources
The branch of
economics that
studies the
behaviour of
broad economic
aggregates
The branch of
economics that
studies the
behaviour of
individual
economic units;
also called price
theory
Explains how the
economy should
work
Statements about
what ought to be
Explains or
describes how the
economy works
Statements about
what is
The erroneous
conclusion that
one event causes
another simply
because it
precedes the
other
The branch of
economics that
studies the
behaviour of
individual
economic units,
allocation of
resources, and
price and output
determination of
individual
commodities; also
called
Microeconomics
Income from
entrepreneurship;
the difference
between total
revenue and total
cost
Income from land
The things used
1
Scarcity
1
Science
1
Services
1
Social science
1
Stock
1
Variable
1
2
Wages and
salaries
Bar graph
2
Concave curve
2
Convex curve
2
Dependent
variable
to produce goods
and services
The situation
that exists when
resources are
inadequate to
produce all the
goods and
services that
people want
A particular
method of
acquiring
knowledge that
involves
observation,
measurement, and
testing; also
refers to the
knowledge
acquired through
the process
Intangible things
that satisfy
wants
Any discipline
that studies
human behaviour
A quantity
existing at a
particular time
Anything that
changes
Income from
labour
A vertical or
horizontal graph
with categories
on one axis and
the value
assigned to each
category measured
on the other axis
A curve bowed
outward from the
origin
a curve bowed
toward the origin
The variable that
is being
explained; a
variable whose
value is
determined by the
value of some
other variable
2
Direct relation
2
Function
2
Functional
notation
2
Independent
variable
2
Inverse relation
2
Origin
2
Pie chart
2
Slope (of a
curve)
3
Aggregate output
3
Business cycles
3
Circular flow
The relation that
exists between
variables that
increase or
decrease
together; the
variables move in
the same
direction
An expression of
a relation among
variables
A mathematical
tool for
expressing
relations among
variables
The variable that
provides the
explanation; it
causes changes in
the dependent
variable
The relation that
exists between
variables such
that as one
increases, the
other decreases,
and vice versa;
the variables
move in opposite
directions
The point of
intersection of
the vertical and
horizontal axes
on a graph
A circular graph
whose pieces add
up to 100%
The steepness or
flatness of a
curve; the upward
or downward
inclination of a
curve
The total volume
of goods and
services produced
in the economy
Fluctuations in
the aggregate
output of goods
and services
An economic model
3
Firms
3
Cost of living
3
Cost-benefit
approach
3
Economic growth
3
Factor market
3
Free lunch
3
Goods and
services market
3
Households
that shows the
flow of
resources, goods
and services,
expenditures, and
income between
sectors of the
economy
The economic
sector that makes
decisions about
what resources to
purchase and how
the resources
will be used to
produce goods and
services; the
economic unit
that transforms
inputs into
output
The amount of
money that must
be paid to obtain
goods and
services
An analysis in
decision making
that involves the
comparison of
costs and
benefits
An increase in
the economy's
productive
capacity
The market in
which factors of
production are
bought and sold;
also called
resource market
Additional output
produced without
sacrificing the
production of any
other good or
service
The market in
which goods and
services
(products) are
bought and sold;
also called
product market
The economic
3
Inflation
3
Law of
increasing
opportunity cost
3
Market
3
Money flows
3
Opportunity cost
3
Product market
3
Production
possibility
(p-p) curve
3
Production
possibility
(p-p) schedule
sector that makes
decisions about
what resources to
sell and what
goods and
services to buy
A sustained
increase in the
average level of
prices over time;
a persistent
increase in the
cost of living
The phenomenon of
increasing unit
cost as an
economy increases
its production of
a commodity
The mechanism
that facilitates
the buying and
selling of
resources and
goods and
services
Flows of income
and expenditures
in monetary terms
The alternative
that is
sacrificed when a
choice is made
The market in
which goods and
services
(products) are
bought and sold;
also called goods
and services
market
A graph showing
all combinations
of goods and
services that can
be produced if
all resources are
fully employed
and technology is
constant
A table showing
various
combinations of
goods and
services that can
be produced with
3
Productive
efficiency
3
Productive
inefficiency
3
Real flows
3
Resource market
3
Unemployment
4
Complements
(complementary
goods)
Complements (in
production)
4
4
Demand
full utilization
of all resources
and a given state
of technology
The situation
that exists when
an economy cannot
increase its
production of one
commodity without
reducing its
production of
some other
commodity
The situation
that exists when
it is possible to
produce more of
one commodity
without producing
less of some
other commodity
Flows of real,
physical goods,
services, and
resources
The market in
which factors of
production are
bought and sold;
also called
factor market
The condition
that exists when
people who are
willing and able
to work at
prevailing wage
rates are unable
to find jobs
Goods that are
consumed (used)
together
Goods such that
the production of
one implies the
production of the
other; also
called joint
products
The various
quantities of a
good or service
that people are
willing and able
to buy at various
4
Demand curve
4
Demand schedule
4
Demand shifters
4
Equilibrium
price
4
Equilibrium
quantity
4
Excess quantity
demanded
4
Excess quantity
supplied
4
Income effect
4
Independent
goods
Inferior goods
4
prices during a
specific period
A downwardsloping curve
showing the
inverse
relationship
between price and
quantity demanded
A table showing
the inverse
relationship
between price and
quantity demanded
The non-price
determinants that
shift the demand
curve
The price at
which quantity
demanded equals
quantity
supplied; there
is no tendency
for this price to
change
The quantity
traded (bought
and sold) at the
equilibrium price
A situation in
which quantity
demanded exceeds
quantity
supplied; also
called shortage
A situation in
which quantity
supplied exceeds
quantity
demanded; also
called surplus
The effect on
quantity demanded
caused by the
change in
purchasing power
resulting from a
change in price
Goods that are
not related
Goods for which
demand decreases
as income
increases and for
which demand
4
Joint products
4
Law of demand
4
Law of supply
4
Market condition
4
Market-size
effect
4
Normal goods
4
Quantity
demanded
4
4
Real income
(constant
prices)
Shortage
4
Substitute
increases as
income falls
Goods such that
the production of
one implies the
production of the
other; also
called
complements (in
production)
A statement of
the inverse
relationship
between price and
quantity demanded
A statement of
the direct
relationship
between price and
quantity supplied
The relationship
between quantity
demanded and
quantity supplied
The effect on
quantity demanded
caused by a
change in the
number of buyers
in the market as
a result of a
change in price
Good for which
demand increases
as income
increases and for
which demand
falls as income
falls
The quantity that
people will be
willing and able
to buy at a
specific price
Income expressed
in terms of
constant dollars
A situation in
which quantity
demanded exceeds
quantity
supplied; also
called excess
quantity demanded
A good that can
be used in place
4
Substitutes (in
production)
4
Substitution
effect
4
Supply
4
Supply curve
4
Supply schedule
4
Supply shifters
4
Surplus
5
Coefficient of
elasticity of
demand
5
Coefficient of
elasticity of
supply
5
Cross-price
elasticity of
of another
Goods that are
produced as
alternatives to
each other
The effect on
quantity demanded
caused by people
switching to or
from a product as
its price changes
The various
quantities of a
good or service
that sellers are
willing and able
to offer for sale
(place on the
market) at
various prices
during a specific
period
An upward-sloping
curve showing the
direct
relationship
between price and
quantity supplied
A table showing
the direct
relationship
between price and
quantity supplied
The non-price
determinants that
shift the supply
curve
A situation in
which quantity
supplied exceeds
quantity
demanded; also
called excess
quantity supplied
The number that
measures the
degree of
elasticity of
demand
The number that
measures the
degree of
elasticity of
supply
The degree of
responsiveness in
demand
5
Elastic demand
5
Elasticity
5
Income
elasticity of
demand
5
Inelastic demand
5
Market period
5
Perfectly
elastic demand
5
Perfectly
inelastic demand
5
Price elasticity
of demand
5
Price elasticity
quantity demanded
of one good to a
change in the
price of a
related good
A given
percentage change
in price causes a
more than
proportional
change in
quantity demanded
A measure of the
sensitivity of
one variable to a
change in some
other variable
The degree to
which quantity
demanded responds
to a change in
income; it is the
percentage change
in quantity
divided by the
percentage change
in income
A given
percentage change
in price causes a
less than
proportional
change in
quantity demanded
A situation in
which producers
cannot vary the
quantity of goods
placed on the
market; also
known as a very
short period
A change in price
causes an
infinitely large
change in
quantity demanded
A change in price
has no effect on
quantity demanded
The degree to
which quantity
demanded responds
to a change in
price
The degree to
of supply
5
Reservation
price
5
Unit elasticity
of demand
5
Very short
period
6
Black market
6
Consumer surplus
6
Deadweight loss
6
Excise tax
6
Incidence of a
tax
6
Price ceiling
which quantity
supplied responds
to a change in
price
The price below
which sellers
prefer to
withdraw their
products from the
market
A given
percentage change
in price causes a
proportional
change in
quantity demanded
A situation in
which producers
cannot vary the
quantity of goods
placed on the
market; also
called market
period
A market in which
products are sold
illegally above
the price
prescribed by law
The difference
between the
amount that
consumers would
have paid for a
commodity and the
amount that they
actually pay
The loss in
consumer surplus
and producer
surplus resulting
from a switch
from an efficient
level of
production to an
inefficient level
of production
A tax levied on
the sale of a
specific
commodity
The distribution
of the burden of
a tax
The upper limit
at which a seller
6
Price floor
6
Producer surplus
6
Production quota
6
Quantity
restriction
7
Budget line
7
Consumption
possibility
schedule
7
Engel curve
is legally
allowed to sell a
commodity
The lowest price
at which a seller
is legally
allowed to sell a
commodity
The difference
between the
amount that
producers receive
from selling an
item and the
amount they would
have accepted for
the item
The maximum
quantity of an
item that
producers can
legally produce;
also called
quantity
restriction
The maximum
quantity of an
item that
producers can
legally produce;
also called
production quota
A graphical
representation of
all possible
combinations of
two commodities
that a consumer
can purchase for
the same amount
of money; also
called price line
A table showing
various
combinations of
goods and
services that a
consumer can
purchase for the
same amount of
money; also
called purchase
possibility
schedule
A curve that
shows the
7
Equimarginal
principle
7
Giffen good
7
Income
consumption
curve
7
Indifference
curve map
7
Indifference
curve
7
Indifference map
7
Indifference
schedule
7
Marginal rate of
substitution
(MRS)
relationship
between income
and consumption
The concept that
a value is
maximized (or
minimized) by
equating marginal
values
A good whose
quantity demanded
rises as its
price rises and
falls as its
price falls
The line joining
the points of
tangency between
budget lines and
indifference
curves as the
consumer's income
changes
A collection of
indifference
curves; also
called
indifference map
A graph that
shows all
combinations of
two commodities
(or groups of
commodities) that
yield the same
level of
satisfaction
A collection of
indifference
curves; also
called
indifference
curve map
A table showing
various
combinations of
commodities that
give a consumer
the same level of
satisfaction
The rate at which
a consumer is
willing to trade
units of one
commodity for
units of another
7
Marginal utility
7
Market demand
curve
7
Paradox of value
7
Price
consumption
curve
7
Price line
7
Principle of
diminishing
marginal rate of
substitution
commodity so as
to keep his or
her level of
satisfaction
unchanged
The extra
satisfaction
derived from the
consumption of
additional units
of a good or
service
The demand curve
representing the
demand of all the
buyers in the
market for an
item
The apparent
(superficial)
contradiction in
the fact that an
absolute
necessity, such
as water, has a
lower value than
a luxury item,
such as diamonds;
also called
water-diamond
paradox
A line joining
the points of
tangency between
budget lines and
indifference
curves as the
price of one of
the items changes
A graphical
representation of
all possible
combinations of
two commodities
that a consumer
can purchase for
the same amount
of money; also
called budget
line
The hypothesis
that as a
consumer moves
along an
indifference
curve, consuming
7
Purchase
possibility
schedule
7
Total utility
7
Util
7
Utility
7
Water-diamond
paradox
8
Average product
(AP)
8
Economic
efficiency
more and more of
one commodity,
and less and less
of another
commodity, the
marginal rate of
substitution
diminishes
A table showing
various
combinations of
goods and
services that a
consumer can
purchase for the
same amount of
money; also
called
consumption
possibility
schedule
Total
satisfaction
derived from the
consumption (or
use) of a good or
service
The measure for a
unit of
satisfaction
The satisfaction
derived from
consuming goods
and services
The apparent
(superficial)
contradiction in
the fact that an
absolute
necessity, such
as water, has a
lower value than
a luxury item,
such as diamonds;
also called
paradox of value
The output per
unit of a
variable factor;
total product
divided by the
quantity of the
variable factor
employed
Efficiency
measured in terms
8
Economic
efficiency
ratios
8
Firms
8
Fixed factors
8
Law of
diminishing
(marginal)
returns
8
Long run
8
Marginal product
(MP)
8
Point of
saturation
of cost
Numbers that
measure the
economic
efficiency of
methods of
production
The economic
sector that makes
decisions about
what resources to
purchase and how
the resources
will be used to
produce goods and
services; the
economic unit
that transforms
inputs into
output
Inputs that the
firm cannot
change during a
given period;
factors of
production whose
quantity does not
vary with the
volume of output
The hypothesis
that any
increases in a
variable factor,
while holding one
or more factors
constant, will
eventually cause
marginal product
to decline; also
called law of
variable
proportion
A situation in
which the firm
has only variable
factors
The extra output
derived from
using one
additional unit
of a variable
factor
The point beyond
which the
marginal product
is negative
8
Principle of
substitution
8
Production
8
Production
function
8
Profit
8
Short run
8
Technical
(technological)
efficiency
Total product
(TP)
8
8
Variable factors
9
Accounting costs
9
Average fixed
cost (AFC)
9
Average total
cost (ATC)
The tendency for
the firm to
substitute a
cheap factor for
a more expensive
factor
The process by
which firms
convert inputs
into output
The relation
between inputs
and output
Income from
entrepreneurship;
the difference
between total
revenue and total
cost
A situation in
which the firm
has at least one
fixed factor and
so is unable to
vary all its
inputs
Efficiency
measured in terms
of inputs
The maximum
quantity of
output that a
firm can produce
during a period
Inputs that the
firm can change
during a given
period
Direct payments
to someone
outside the firm
for inputs, such
as wages, rent,
and utility
bills; also
called explicit
costs
The total fixed
cost per unit of
output; total
fixed cost
divided by the
number of units
produced
The total cost
per unit of
9
Average variable
cost (AVC)
9
Constant returns
to scale
9
Cost
9
Cost function
9
Decreasing
(long-run
average) cost
9
Decreasing
returns to scale
output; the sum
of average fixed
cost and average
variable cost
The total
variable cost per
unit of output;
total variable
cost divided by
the quantity
produced
The condition
that exists when
a firm increases
all its inputs by
a certain
percentage and,
as a result, its
output increases
by the same
percentage
A payment for the
inputs used to
produce goods and
services
The mathematical
expression of the
relationship
between cost and
output
The condition
that exists when
a firm increases
all its inputs
and, as a result,
its output
increases by a
greater
proportion than
the increase in
its inputs; also
called economies
of scale and
increasing (longrun average) cost
The condition
that exists when
a firm increases
all its inputs
and, as a result,
its output
increases but by
a smaller
proportion than
the increase in
its inputs; also
9
Depreciation
9
Diseconomies of
scale
9
Economic costs
9
Economies of
scale
9
Economies of
scope
9
Envelope curve
called increasing
(long-run
average) cost and
diseconomies of
scale
A loss of asset
value through use
or over time
The condition
that exists when
a firm increases
all its inputs
and, as a result,
its output
increases but by
a smaller
proportion than
the increase in
its inputs; also
called increasing
(long-run
average) cost and
decreasing
returns to scale
The sum of
explicit and
implicit costs;
they include all
opportunity costs
The condition
that exists when
a firm increases
all its inputs
and, as a result,
its output
increases by a
greater
proportion than
the increase in
its inputs; also
called decreasing
(long-run
average) cost and
increasing
returns to scale
The situation
that exists when
the costs of
producing
different goods
together are less
than they would
be if the goods
were produced
separately
The cost curve
9
Explicit costs
9
Fixed costs
9
Implicit costs
9
Imputed costs
9
Increasing
(long-run
average) cost
showing the
minimum cost per
unit at which a
firm can produce
a given volume of
output when its
inputs are all
variable; also
called long-run
average cost
curve and
planning curve
Direct payments
to someone
outside the firm
for inputs, such
as wages, rent,
and utility
bills; also
called accounting
costs
Costs that do not
vary with the
volume of output;
they exist even
when output is
zero; also called
overhead costs
Opportunity costs
that do not
involve any
direct payment to
anyone outside
the firm; also
called imputed
costs
Opportunity costs
that do not
involve any
direct payment to
anyone outside
the firm; also
called implicit
costs
The condition
that exists when
a firm increases
all its inputs
and, as a result,
its output
increases but by
a smaller
proportion than
the increase in
its inputs; also
called decreasing
9
Increasing
returns to scale
9
Incremental cost
9
Long-run average
cost curve
9
Long-run average
cost
9
Marginal cost
9
Minimum
efficient scale
(long-run
average) cost and
diseconomies of
scale
The condition
that exists when
a firm increases
all its inputs
and, as a result,
its output
increases by a
greater
proportion than
the increase in
its inputs; also
called economies
of scale and
decreasing (longrun average) cost
The extra cost
incurred by
increasing output
by one unit; also
called marginal
cost
The cost curve
showing the
minimum cost per
unit at which a
firm can produce
a given volume of
output when its
inputs are all
variable; also
called envelope
curve and
planning curve
The minimum cost
per unit at which
a firm can
produce a given
volume of output
when its inputs
are all variable
The extra cost
incurred by
increasing output
by one unit; also
called
incremental cost
The point at
which increasing
returns to scale
end and constant
returns to scale
begin; the
9
Overhead costs
9
Planning curve
9
Variable costs
10
Bond
10
Consumer
cooperative
10
Cooperative
10
Corporation
10
Debt capital
minimum point of
the long-run
average cost
curve
Costs that do not
vary with the
volume of output;
also called fixed
costs
The cost curve
showing the
minimum cost per
unit at which a
firm can produce
a given volume of
output when its
inputs are all
variable; also
called envelope
curve and longrun average cost
curve
Costs that are
dependent on the
volume of output
Interest-earning
evidence of debt
issued by a
government, or
corporation,
which pays
interest to the
lender for a
specified period
and the principle
when the loan
matures
A cooperative
formed by
consumers to
promote their
interests
A business owned,
financed, and
controlled by its
members, who
share in the
profits and risks
in proportion to
their patronage
A business in
which all owners
have limited
liability
Capital (funds)
raised through
10
Equity capital
10
General
partnership
10
Limited
liability
10
Limited partners
10
Limited
partnership
10
Marketing
cooperative
10
Organization
chart
10
Organizational
structure
10
Partnership
agreement
10
Prime rate
10
Producer
cooperative
10
Purchasing
bonds or credit
Capital raised
from issuing
shares
A business owned
by two or more
people, without
limited liability
A provision that
makes investors
in a corporation
liable only up to
the amount of
money they
invested in the
business
Partners who have
limited liability
A business owned
by two or more
people, one or
more, but not
all, of whom have
limited liability
A cooperative
whose objective
is to take
advantage of
large-volume
selling
A diagrammatic
representation of
the firm's
organizational
structure
An arrangement of
jobs within a
firm and how they
are related
An oral or a
written agreement
governing the
partners in a
business
The rate of
interest that
banks charge
their most
creditworthy
customers
A cooperative
formed by
producers to
promote their
interests
A cooperative
cooperative
10
Retained
earnings
10
Single
proprietorship
10
Undistributed
profits
11
Atomistic
competition
11
Average revenue
(AR)
11
Break-even level
of output
11
Break-even point
11
Constant-cost
industry
11
Decreasing-cost
industry
11
Imperfect
competition
whose objective
is to take
advantage of
large-scale
purchasing
Profits that are
not distributed
to shareholders;
also called
undistributed
profits
A business owned
by a single
individual,
without limited
liability; also
called sole
proprietorship
Profits that are
not distributed
to shareholders;
also called
retained earnings
A market in which
each firm
accounts for an
extremely small
fraction of the
total output
The revenue per
unit of output
sold; total
revenue divided
by quantity sold
The level of
output at which
total revenue
equals total cost
The point at
which total
revenue equals
total cost
An industry in
which costs
remain constant
as the industry
expands
An industry in
which costs
decrease as the
industry expands
A collective term
covering
monopolistic
competition and
oligopoly
11
Increasing-cost
industry
11
Industry
11
Marginal-cost
pricing
11
Marginal revenue
11
Market structure
11
Monopolistic
competition
11
Monopoly
11
Normal profit
11
Oligopoly
11
Pareto
efficiency
An industry in
which costs
increase as the
industry expands
A group of firms
that produce
similar products
The establishment
of the equality
of price and
marginal cost
The extra revenue
obtained by
selling an
additional unit
of output
The competitive
nature of the
market
environment in
which firms make
their pricing and
output decisions
A market with a
large number of
firms selling
differentiated
products
A market
structure
characterized by
a single firm
producing a
product that has
no close
substitutes
A profit that is
equal to the
alternative
(opportunity)
cost of the
resources
employed in
production; also
called zero
economic profit
A market
structure in
which there are
only a few firms,
selling identical
or differentiated
products
The condition
that exists when
it is impossible
11
Pareto
optimality
11
Perfect
competition
11
Price-taker
11
Pure competition
11
Short-run
shutdown point
11
Zero economic
profit
to make someone
better off
without making
someone else
worse off; also
called Pareto
optimality
The condition
that exists when
it is impossible
to make someone
better off
without making
someone else
worse off; also
called Pareto
efficiency
A market in which
numerous firms
produce identical
products and to
which there are
no entry or exit
barriers; also
called pure
competition
A firm with no
control over the
price of its
product; it
cannot, by
itself, affect
the market price
at which it sells
its product by
varying its level
of output; a firm
in pure
competition is a
price-taker
A market in which
numerous firms
produce identical
products and to
which there are
no entry or exit
barriers; also
called perfect
competition
The point at
which price
equals the
minimum average
variable cost
A profit that is
equal to the
12
Allocative
efficiency
12
Arbitrage
transactions
12
Dumping
12
Franchise
12
Market power
12
Monopoly power
12
Natural monopoly
12
Patent
12
Price
discrimination
alternative
(opportunity)
cost of the
resources
employed in
production; also
called normal
profit
The condition
that exists when
price equals
marginal cost
The purchase of
products in a
low-price market
and their resale
in a high-price
market
The practice of
selling exports
in foreign
countries more
cheaply than the
domestic price
An exclusive
right to operate
a business in a
certain
geographical area
The ability of a
firm to exert
control over
price and output;
also called
monopoly power
The ability of a
firm to exert
control over
price and output;
also called
market power
A market in which
a single firm can
satisfy the
entire market
demand more
cheaply than two
or more firms
could
An exclusive
right that a
government grants
a producer to
produce a product
The practice of
selling a product
12
X-inefficiency
13
Cartel
13
Collusions
13
Concentration
ratio
13
Contestable
market
13
Cost-plus
pricing
13
Differentiated
oligopoly
in different
markets at
different prices
for reasons
unrelated to cost
A condition that
exists when a
firm fails to use
its resources in
their most
economically
efficient way
A formal
agreement among
independent firms
to act in concert
to control price
and output in a
particular
industry
Firms that unite
to control price
and output in
particular
markets
The percentage of
total market
share accounted
for by a few of
the largest firms
in the industry
A market into
which entry is so
easy that the
threat of entry
by potential
competitors
prevents the
existing firms
from exercising
any monopoly
power
A pricing
strategy in which
firms determine
price by adding a
certain
percentage markup
on cost; also
called markup
pricing
An oligopoly in
which the firms'
products are
differentiated
13
Duopoly
An industry
consisting of
only two firms
13
Excess capacity
theorem
13
Game theory
13
HerfindahlHirschman Index
(HHI)
13
Kinked demand
curve
13
Limit pricing
13
Markup pricing
The hypothesis
that firms in
monopolistic
competition will
operate with
excess capacity
A device used by
economists to
study strategies
in situations
where the
interdependence
of decisions is
recognized
An index of
industry
concentration
derived from
summing the
squares of the
market shares of
the firms in the
industry
A demand curve
with a kink
resulting from
the assumption
that firms will
follow the lead
of a price
reduction but not
of a price
increase; used to
explain price
rigidity
A pricing
strategy in which
firms set their
prices so low
that new entrants
into the market
will make no
profits; also
called predatory
pricing
A pricing
strategy in which
firms determine
price by adding a
certain
percentage markup
on cost; also
called cost-plus
13
Menu costs
13
Nash equilibrium
13
Payoff
13
Payoff matrix
13
Predatory
pricing
13
Price leadership
13
Product
differentiation
13
Unwritten
agreements
13
Workable
competition
pricing
Costs incurred
when changing
prices; may
explain price
rigidity
The condition
that exists when
each player in a
game selects the
best possible
strategy, given
the strategies of
the other players
The result or
outcome of a
strategy in a
game
A table that
shows the
outcomes of
various
strategies in a
game
A pricing
strategy in which
firms set their
prices so low
that new entrants
into the market
will make no
profits; also
called limit
pricing
The condition
that exists when
one firm in an
industry takes
the lead in
changing prices
and the other
firms follow suit
The condition
that exists when
firms distinguish
their products
from those of
their competitors
Agreements
reached by
handshake only,
with no formal
written document
The condition
that exists when
competition is
14
Closed shop
14
Collective
agreement
14
Collective
bargaining
14
Compulsory
arbitration
14
Conciliation
14
14
Cost-of-living
adjustment
(COLA)
Craft union
14
Derived demand
14
Direct demand
14
Escalator clause
sufficient to
ensure that
market power is
not excessive
A workplace in
which jobs are
given only to
union members
The contract that
results from the
collective
bargaining
process
The process by
which wages and
other working
conditions are
negotiated
between a union
and an employer
The compulsory
submission of a
dispute to a
third party whose
decision on the
matter is binding
The process of
submitting a
dispute to a
mediator for
recommendations
for settlement;
also called
mediation
The adjustment of
wages to the cost
of living
A union of
workers in a
single
occupation; also
called trade
union
The demand for
inputs that is
due to the demand
for the goods and
services produced
by the inputs
The demand for
final goods and
services as
opposed to the
demand for factor
inputs
A stipulation in
14
Featherbedding
14
14
Federation (of
unions)
Income statement
14
Indexation
14
Industrial union
14
Interest rate
14
International
union
14
Labour union
14
Loanable funds
theory of the
rate of interest
14
Local union
a labour contract
that future wages
and salaries will
be adjusted to
reflect changes
in the price
level
The practice of
providing workers
with unnecessary
work to keep them
on the payroll
An association of
national unions
An accounting
device for
reporting
revenues,
expenses, and net
income; also
called profit and
loss statement
The adjustment of
wages to the rate
of price increase
A union of
workers in a
given industry
The price paid
for the use of
money; also
called rate of
interest
A union whose
membership
consists of local
unions in
different
countries
An association of
workers organized
to promote the
interests of its
members in
negotiations with
their employers;
also called
labour union
A theory that the
rate of interest
is determined by
the demand for
and supply of
loanable funds
The lowest level
of a union and
14
Lockout
14
Marginal
physical product
of labour
14
Marginal
productivity
theory of wages
14
Marginal revenue
product (of
labour) (MRP)
14
Maturity
14
Mediation
14
National union
the one to which
a worker belongs
directly
A temporary
closing of a
plant by the
employer to win
or end a dispute
The extra output
derived from
using an
additional unit
of labour
The theory that
under purely
competitive
conditions a
profit-maximizing
firm will hire
labour up to the
point at which
the wage rate
equals the value
of the marginal
product of labour
The additional
revenue
contributed by
the last unit of
labour; it is the
marginal physical
product
multiplied by the
price of the
product or the
value of the
marginal physical
product
The length of
time before a
loan is supposed
to be paid off
The process of
submitting a
dispute to a
mediator for
recommendations
for settlement;
also called
conciliation
A national
association of
local unions,
which usually
sets policy and
does the
14
Net income
14
Nominal rate of
interest
14
Open shop
14
Profit and loss
statement
14
Pure economic
rent
14
Quasi-rent
14
Rand formula
14
Rate of interest
14
Real rate of
bargaining for
the associated
unions
The difference
between total
revenue and total
expenses
The rate quoted
for a loan or a
deposit, which
includes a
premium for
inflation
A workplace in
which union
membership is not
a prerequisite
for employment
An accounting
device for
reporting
revenues,
expenses, and net
income; also
called income
statement
The income
derived from a
factor of
production whose
supply is
completely price
inelastic
The return on a
factor of
production whose
supply is fixed
only in the short
run
The legislation
that made it
compulsory for a
worker who is a
member of the
unit for which a
union is the
bargaining agent
to pay union dues
even if not a
union member
The price paid
for the use of
money; also
called interest
rate
The interest rate
interest
14
Risk premium
14
Strike
14
Trade union
14
Transfer
earnings
14
Union shop
14
Union
14
Voluntary
arbitration
14
Wage transfer
mechanism
that would be
charged if the
rate of inflation
were zero
An addition to
the interest rate
to compensate for
the risk of
default
A work stoppage
by a union in an
attempt to exert
pressure on the
employer
A union of
workers in a
single
occupation; also
called craft
union
The term used to
describe the
amount that a
factor of
production can
earn in the nextbest employment
alternative
A workplace in
which workers who
are not union
members can be
hired, provided
that they become
union members
within a
specified period
An association of
workers organized
to promote the
interests of its
members in
negotiations with
their employers;
also called
labour union
The voluntary
submission of a
dispute to a
third party whose
decision on the
matter is binding
The process by
which changes in
wages in one
occupation are
15
Absolute poverty
15
Economic
discrimination
15
Gini coefficient
15
Government
transfer
payments
15
Guaranteed
annual income
proposal
15
Incidence of
poverty
Lorenz curve
15
15
Low income cutoff
15
Market income
transmitted to
other occupations
The condition
that exists when
an individual or
a family lacks
the financial
resources
required for the
basic necessities
of life
The situation in
which certain
groups are
targeted for
different
treatment in the
labour market
A ratio that
measures the
degree of income
inequality
Payments from the
government that
do not represent
payments for
productive
services; they
include such
items as
employment
insurance and
welfare payments
A proposal for
the government to
give everyone a
grant of a
certain amount of
money; any income
above that level
would be subject
to tax
The likelihood of
being poor
A graphical
device for
measuring income
inequality
An arbitrary
level of income
below which
poverty is said
to exist; also
called poverty
line
The sum of
15
Negative income
tax
15
Poverty line
15
Relative poverty
15
Size
distribution of
income
16
Absolute
advantage
16
Comparative
advantage
16
Geographical
determinism
earnings from
employment and
self-employment,
investment
income, private
retirement
income, and other
incomes,
excluding
government
transfers
A system whereby
the government
makes payments to
people whose
incomes are below
the taxable level
An arbitrary
level of income
below which
poverty is said
to exist; also
called low income
cut-off
The condition
that prevails
when an
individual or a
family has a
standard of
living that is
far below that
enjoyed by others
in society
The distribution
of income among
individuals and
households
The ability to
produce a
commodity by
using fewer
resources than
another producer
can
The ability to
produce a
commodity at a
lower opportunity
cost than another
country can
The theory that
comparative
advantage is
determined by
natural endowment
16
International
trade
16
Terms of trade
16
Trading curve
17
20% club
17
Common-pool
problem
17
Economic
externality
17
Effluent fee
17
External
diseconomy
17
External economy
17
Greenhouse
effect
The exchange of
goods, services,
and resources
between nations
The rate at which
a country's
exports exchange
for its imports
A graphical
depiction of all
combinations of
goods and
services
available through
specialization
and trade
A group of
municipalities
whose objective
was to reduce
greenhouse gas
emissions by 20%
by 2005
The overuse of
open-access
resources that
occurs because of
unrestricted
access
A cost or benefit
that accrues to
persons not
directly involved
in the actions or
decisions made by
firms and
individuals
A fee that is
imposed on a
polluter for
polluting the
environment
An economic
externality that
results in a
cost; also called
negative
externality
An economic
externality that
results in a
benefit; also
called positive
externality
The heating of
the earth by
17
Kyoto Protocol
17
Market failure
17
Merit goods
17
Negative
externality
17
Open-access
resources
17
Positive
externality
17
Private costs
17
Public goods
17
Social costs
greenhouse gases
A treaty signed
by about 180
countries at
Kyoto, Japan, to
reduce greenhouse
gas emissions
The inability of
the price system
to achieve an
efficient
allocation of
resources
Goods or services
that the
government has
determined to be
necessary and
therefore
mandatory for
society
An economic
externality that
results in a
cost; also called
external
diseconomy
Resources that
are difficult or
costly to exclude
individuals from
using
An economic
externality that
results in a
benefit; also
called external
economy
Costs borne
solely and
directly by the
individuals or
firms making the
decision
Goods or services
that are consumed
collectively; no
one can be
excluded from
their consumption
The total costs
to society of
decisions made
and actions taken
by individuals
and firms
18
Adverse
selection
18
Agent
18
Asymmetric
information
18
Economic good
18
Experience goods
18
Information
18
Market
signalling
18
Moral hazard
18
Principal (with
reference to
contractual
agreement)
Principal-agent
18
A situation in
which the
informed party to
a transaction
uses his or her
information
advantage to act
in a way that
harms the
uninformed party
The party chosen
to act on behalf
of the principal
Information that
is known to one
party to a
transaction but
not to the other
A tangible or an
intangible thing
that is scarce
and satisfies
wants
Goods whose
quality can be
known only after
using them
Knowledge of
specific events
or situations
derived from
study,
experience, or
instruction
The transmission
of information,
by the use of
proxy measures,
about
unobservable
characteristics
The tendency for
one party to a
contract to
behave, after the
contract is
negotiated and
signed, in a
manner that harms
the other party
to the contract
the main party in
a contractual
agreement
The problem that
problem
18
Search costs
18
Search goods
arises when the
agent can take
hidden actions
that accomplish
the agent’s
objectives to the
detriment of the
principal
The costs, such
as search time,
incurred in
searching for
information about
a product
Goods whose
quality can be
evaluated by
inspection at the
time of purchase