LC Economics (Micro)– Key Definitions
The quantity of a good or a service that Demand customers will purchase at varying prices
The quantity of a Supply good or a service that producers will sell at varying prices
The cost of forgone Opportunity alternatives involved in making Cost a choice
As the price of a normal Law of good rises, the quantity demanded will fall & vice Demand versa, all things being equal LC Economics (Micro) – Key Definitions
As the price of a normal Law of good rises, the quantity supplied will rise & vice Supply versa, all things being equal
The satisfaction a consumer gets from Utility consuming a good or service
The extra satisfaction Marginal a consumer gets from Utility consuming an extra unit of a good or service
The difference between Consumer what a consumer pays for a good and the maximum Surplus they were willing to pay rather than go without LC Economics (Micro) – Key Definitions
The difference between Producer what a producer receives for a good and the lowest Surplus price they were willing to accept
As more & more of a good Law of Diminishing is consumed, the marginal Marginal Utility utility gained from each successive unit decreases
In order to maximise utility, Equi-Marginal Principle/ consumers should spend their income so that the ratio Law of Equi-Marginal of marginal utility to price is Returns the same for all goods consumed
A period of time in which at least one factor of Short Run production is fixed. Law of Diminishing Returns applies LC Economics (Micro) – Key Definitions
A period of time in which all factors of productions Long Run are variable. Law of Diminishing Returns does not apply
Costs that remain the same, regardless of Fixed Costs the quantity of goods produced
The minimum amount of profit an entrepreneur Normal Profit must earn to keep resources in their present use in the long run
A reduction in Economies average costs as a of Scale firm produces on a large scale LC Economics (Micro) – Key Definitions
Law of As increasing quantities of a variable factor is added to a Diminishing fixed, a stage will be reached where addition to total output Marginal Returns will decline
Profit earned in Supernormal excess of normal profit. Average Profit revenue > average costs
Measures taken in an industry to improve Deregulation competition and allow for an efficient market to exist
Many brands are Brand made & advertised Proliferation under the same umbrella LC Economics (Micro) – Key Definitions
Selling goods at exceptionally low Limit Pricing prices. Deters competition
In oligopolies, the Price biggest firm sets the price and other firms Leadership follow this pricing policy
Firms come together for their mutual benefit. They Collusion act together to set price, output or other conditions of sale
Anything given by nature that is used to Land make goods or provide a service. Return = Rent
LC Economics (Micro) – Key Definitions
Human effort used to make goods or Labour provide a service. Return = Wages
Anything man made Capital used to make a good or provide a service. Return = Interest
Organises the other factors into a production Enterprise unit to produce a good/service. Return = Profit
Where a factor is Derived demanded for its contribution to the Demand production process
LC Economics (Micro) – Key Definitions
The extra output Marginal produced as a result Physical Product of employing an extra factor
The extra revenue Marginal Revenue earned as a result of Productivity employing an extra factor
The minimum payment required to Supply Price bring a factor into use & maintain it in that use
What a factor must earn Transfer to keep it in its present use & prevent it from Earnings transferring to an alternative use LC Economics (Micro)– Key Definitions
Any earnings of a Economic factor of production Rent above its supply price
Occurs when Negative property is worth less Equity than the mortgage obtained to purchase it
Mortgage The inability to meet mortgage Arrears loan obligations
The ease with which Mobility of workers can move from one area to another, or Labour from one firm to another LC Economics (Micro) – Key Definitions
Occurs when a Unemployment person of employable age is out of work
The number of Workforce people actually working in the economy
The number of people Labour available for work i.e. unemployed + Force workforce
The proportion of the Participation active age group (16- Rate 65) who are in the labour force
LC Economics (Micro) – Key Definitions
Dependency The proportion of the population not Rate working
When everyone looking Full for employment at existing wage rates is Employment employed
Notes the number of people signing up for Live Register social welfare schemes & are on partial work schemes
Occurs when wage levels rise above the Wage Drift negotiated rates due to a high demand for labour LC Economics (Micro) – Key Definitions
All unrecorded economic Black activity in the National Income Accounts. No tax Economy is paid on this activity
Rent of a temporary Quasi-Rent nature. Eliminated in the long run
Labour The output per worker per period Productivity of time
Wages adjusted to take account of inflation i.e. Real Wages purchasing power of wages LC Economics (Micro)– Key Definitions
Investment Adding to the stock of (Capital capital. The use of Formation) savings for production
The part of one’s income that is not Savings consumed. Income > Expenditure
The extra income MRP of earned due to hiring Capital one extra unit of capital
Capital When a firm becomes more Deepening capital intensive LC Economics (Micro) – Key Definitions
States that interest Liquidity rates are determined Preference Theory by the supply of and demand for money
Transactionary The desire to hold Motive money for day-to-day expenses
The desire to hold Precautionary money for Motive emergencies
The desire to hold Speculative money for possible Motive future investment opportunities LC Economics (Micro) – Key Definitions
Supernormal Profit Rent of earned by an entrepreneur due to their Ability business acumen
Explicit Costs that the firms pay and are included Costs in the accounts
Implicit Costs that are often non-monetary and Costs difficult to identify
States that the value of a Labour Theory of product is equal to the amount of labour that Value went into producing it