Unit 2 – Microeconomics Key Terms and Concepts

The actual amount of a good or service consumers are willing to buy at some specific price.

Consumer willingness and ability to buy products

Consumers ability to substitute other products for the focal brand and increase price elasticity of demand for the focal brand

A change in the quantity demanded of a product that results from the change in real income (purchasing power) caused by a change in the product's price.

A good for which, other things equal, an increase in income leads to an increase in demand

A good for which, other things equal, an increase in income leads to a decrease in demand

Two goods for which an increase in the price of one leads to a decrease in the demand for the other

Goods and services that can be used for the same purpose.

Anything other than price of the current item that influences consumer buying decisions, including income, tastes and preferences, price of related items (substitutes and complements), number of consumers in the market, and expected future price.

Anything other than price of the current item that influences production decisions, including cost of raw materials, cost of labor, level of technology used to produce, number of producers in the market, price of related products, and expected future price.

A measure of how much one economic variable responds to changes in another economic variable.

An increase in owner's equity resulting from the operation of a business

A situation in which the market price has reached the level at which quantity supplied equals quantity demanded

A legal maximum on the price at which a good can be sold

A legal minimum on the price at which a good can be sold

A minimum price that an employer can pay a worker for an hour of labor

A situation in which quantity supplied is greater than quantity demanded

A situation in which quantity demanded is greater than quantity supplied

Decreasing satisfaction or usefulness as additional units of a product are acquired

A government payment that supports a business or market

A tax on the manufacture, sale, or consumption of certain products

Efforts by government to alter the free operation of the market to achieve social goals such as protecting workers and the environment.

Increase in the amount of output from an additional unit of labor

Costs required to produce a product or service that are not dependent on the quantity of services provided (e.g., rent for office space)

Costs that change directly with the amount of production (e.g. energy supply and labor costs).

Sum of fixed and variable cost

An increase in total cost that arises from an extra unit of production

Change in revenue resulting from a one-unit increase in output

An agreement among firms to divide the market, set prices, or limit production

Laws designed to protect free enterprise and the open marketplace by prohibiting certain business practices that restrict competition. In reference to real estate, these laws would prevent such practices as price-fixing or agreements by brokers to limit their areas of trade.

A formal organization of producers that agree to coordinate prices and production.

A market structure in which a large number of firms all produce the same product. The market situation in which there are many sellers in a market and no seller is large enough to dictate the price of a product

Factors that make it difficult and costly for an organization to enter a particular task environment or industry

A firm that is the sole seller of a product without close substitutes

as a company produces larger numbers of a particular product, the cost of each of these products goes down

A monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms

exists when the government either owns and runs the business or authorizes only one producer

A monopoly granted by the U.S. Patent Office for a limited time to the creator of a new invention.

An exclusive right granted by the federal government allowing the owner to reproduce and sell an artistic or published work.

A market structure in which barriers to entry are low and many firms compete by selling similar, but not identical, products.

(economics) a market in which control over the supply of a commodity is in the hands of a small number of producers and each one can influence prices and affect competitors

A business strategy of providing a product or service that is perceived as unique by customers.

Focuses on factors other than price such as quality, reputation customer service and business location

..., First federal action against monopolies, it was signed into law by Harrison and was extensively used by Theodore Roosevelt for trust-busting. However, it was initially misused against labor unions

1914 legislation that defined those actions in which businesses could not engage; also declared that unions could not be legally attacked as trusts.

A business owned and managed by a single individual

A business owned and controlled by two or more people who have entered into a written agreement

A partnership in which all the partners assume liability for any partner's professional malpractice to the extent of the partnership's assets.

A business owned by stockholders who share in its profits but are not personally responsible for its debts.

An equity (ownership) interest in a corporation, measured in units of shares.

A payment from profits by a company's Board of Director's to shareholders. (Dividends are issued on a regular basis and can be either increased or decreased).

A financial security that represents a promise to repay a fixed amount of funds

the combination of two or more firms competing in the same market with the same good or service

A combination of firms at different stages in the production of a good or service

A group of diverse companies under common ownership and run as a single organization.