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Microeconomics: Supply, Demand, Markets & Game Theory

96 cards · 🇺🇸 English

How individuals, firms and markets make economic decisions.

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Microeconomics

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  1. 1Microeconomics
    The study of individual and firm behavior in allocating scarce resources and their market interactions
  2. 2What does microeconomics focus on?
    Individual markets, sectors, and industries (not the whole economy)
  3. 3Key goal of microeconomics
    To analyze market mechanisms that establish relative prices and allocate resources
  4. 4Market failure
    When markets fail to produce efficient results
  5. 5Rationality in economics
    Possessing stable preferences that are complete and transitive
  6. 6Utility maximization
    The process by which individuals choose to maximize satisfaction given constraints
  7. 7Utility function
    A mathematical representation of preferences, assigning numbers to preference levels
  8. 8Budget constraint
    The limit on consumption based on income and prices
  9. 9Utility maximization problem
    Maximizing utility subject to a budget constraint
  10. 10Revealed preference theory
    An approach to microeconomics that takes consumer choices (not tastes) as primitive
  11. 11Law of demand
    As price increases, quantity demanded decreases (ceteris paribus)
  12. 12Law of supply
    As price increases, quantity supplied increases
  13. 13Market equilibrium
    The point where quantity supplied equals quantity demanded
  14. 14What happens when price is below equilibrium?
    A shortage occurs - quantity demanded exceeds quantity supplied
  15. 15What happens when price is above equilibrium?
    A surplus occurs - quantity supplied exceeds quantity demanded
  16. 16Demand curve
    A graph showing the relationship between price and quantity demanded
  17. 17Supply curve
    A graph showing the relationship between price and quantity supplied
  18. 18Perfect competition
    A market with many buyers and sellers, identical products, and no barriers to entry
  19. 19Monopoly
    A market with a single seller controlling the entire supply
  20. 20Oligopoly
    A market dominated by a few large firms
  21. 21Monopolistic competition
    Many firms selling differentiated products with some pricing power
  22. 22Marginal utility
    The additional satisfaction from consuming one more unit of a good
  23. 23Law of diminishing marginal utility
    Each additional unit consumed provides less additional satisfaction
  24. 24Marginal cost
    The additional cost of producing one more unit
  25. 25Marginal revenue
    The additional revenue from selling one more unit
  26. 26Opportunity cost
    The value of the next-best alternative foregone when making a choice
  27. 27Consumer surplus
    The difference between what consumers are willing to pay and what they actually pay
  28. 28Producer surplus
    The difference between the price producers receive and their minimum acceptable price
  29. 29Deadweight loss
    The loss of economic efficiency when equilibrium is not achieved
  30. 30Price elasticity of demand
    The percentage change in quantity demanded divided by percentage change in price

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