Microeconomics Glossary

A state where resources are distributed such that the marginal benefit to society equals the marginal cost of production.

Total cost divided by the quantity of output produced, including both fixed and variable costs per unit.

The set of all combinations of goods and services a consumer can afford given their income and prevailing prices.

Goods that are typically consumed together, where an increase in the price of one leads to a decrease in demand for the other.

A measure of how the quantity demanded of one good responds to a change in the price of another good.

A graph showing the relationship between the price of a good and the quantity demanded, holding all other factors constant.

The principle that each additional unit of a good consumed provides less additional satisfaction than the previous unit.

Total revenue minus total cost including both explicit and implicit (opportunity) costs. Differs from accounting profit.

The point where quantity demanded equals quantity supplied, resulting in a stable market price with no tendency to change.

Costs that do not vary with the level of output, such as rent, insurance, and equipment leases.

When individuals benefit from a resource or service without paying for it, leading to under-provision of public goods.

The change in quantity demanded of a good resulting from a change in purchasing power due to a price change.

A good for which demand decreases as consumer income rises, such as instant noodles or bus transportation.

The additional satisfaction or benefit derived from consuming one more unit of a good or service.

The ability of a firm to influence the price of a good or service by adjusting the quantity it produces.

An industry where a single firm can serve the entire market at a lower cost than two or more firms due to high fixed costs and economies of scale.

A good for which demand increases as consumer income rises, such as organic food or new clothing.

An allocation where no individual can be made better off without making at least one other individual worse off.

A firm that has no influence over the market price and must accept the prevailing price for its product.

The process by which a firm determines the price and output level that yields the greatest profit, typically where MR equals MC.

Goods that can replace each other in consumption, where an increase in the price of one leads to an increase in demand for the other.

The change in quantity demanded of a good resulting from a change in its relative price, holding utility constant.

A graph showing the relationship between the price of a good and the quantity supplied, holding all other factors constant.

Costs that change in proportion to the level of output, such as raw materials, labor, and energy.

The branch of economics that evaluates the well-being of individuals and society, using concepts like consumer surplus, producer surplus, and efficiency.