Modern Principles: Microeconomics
1. Incentives: Rewards and penalties that motivate behavior (Ch. 1)
2. Opportunity Cost: Of a choice, the value of the opportunities lost (Ch. 1)
3. Inflation: Increase in the general level of prices (Ch. 1)
4. Absolute Advantage: Ability to produce the same good using fewer inputs than
another producer (Ch. 2)
5. Production Possibilities Frontier: Shows all the combinations of goods that a
country can produce given its productivity and supply of inputs (Ch. 2)
6. Comparative Advantage: In producing goods for which (a country) has the
lowest opportunity cost (Ch. 2)
7. Demand Curve: Function that shows the quantity demanded at different prices
(Ch. 3)
8. Quantity Demanded: Quantity that buyers are willing and able to buy at a
particular price (Ch. 3)
9. Consumer Surplus: The consumer's gain from exchange, or the difference
between the maximum price a consumer is willing to pay for a certain quantity
and the market price (Ch. 3)
10. Total Consumer Surplus: Measured by the area beneath the demand curve
and above the price (Ch. 3)
11. Normal Good: Good for which demand increases when income increases (Ch.
3)
12. Inferior Good: Good for which demand decreases when income increases (Ch.
3)
13. Substitutes: A decrease in the price of one good leads to a decrease in demand
for the other good (Ch. 3)
14. Complements: A decrease in the price of one good leads to an increase in the
demand for the other good (Ch. 3)
15. Supply Curve: Function that shows the quantity supplied at different prices (Ch.
3)
16. Quantity Supplied: Amount of a good that sellers are willing and able to sell at
a particular price (Ch. 3)
17. Producer Surplus: Producer's gain from exchange, or the difference between
the market price and the minimum price a which a producer would be willing to
sell a particular quantity (Ch. 3)
18. Total Producer Surplus: Measured by the area above the supply curve and
below the price (Ch. 3)
19. Surplus: Situation in which the quantity supplied is greater than the quantity
demanded (Ch. 4)
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, Modern Principles: Microeconomics
20. Shortage: Situation in which the quantity demanded is greater than the quantity
supplied (Ch. 4)
21 Equilibrium Price: Price at which the quantity demanded is equal to the quantity
supplied (Ch. 4)
22. Equilibrium Quantity: Quantity at which the quantity demanded is equal to the
quantity supplied (Ch. 4)
23. Elasticity of Demand: Measures how responsive the quantity demanded is to
a change in price; more responsive equals more elastic (Ch. 5)
24. Elasticity of Supply: Measures how responsive the quantity supplied is to a
change in price (Ch. 5)
25. Great Economic Problem: To arrange our limited resources to satisfy as many
of our wants as possible (Ch. 7)
26. Speculation: Attempt to profit from future price changes (Ch. 7)
27. Futures: Standardized contracts to buy or sell specified quantities of a
commodity or financial instrument at a specified price with delivery set at a
specified time in the future (Ch. 7)
28. Prediction Market: Speculative market designed so that prices can be
interpreted as probabilities and used to make predictions (Ch. 7) 29. Price
Ceiling: Maximum price allowed by the law (Ch. 8)
30. Deadweight Loss: Total of lost consumer and producer surplus when not all
mutually profitable gains from trade are exploited. Price ceilings create a
deadweight loss. (Ch. 8)
31. Rent Control: Price ceiling on rental housing (Ch. 8)
32. Price Floor: A minimum price allowed by law (Ch. 8)
33. Protectionism: Economic policy of restraining trade through quotas, tariffs, or
other regulations that burden foreign producers but not domestic producers (Ch.
9)
34. Tariff: A tax on imports (Ch. 9)
35. Trade Quota: Restriction on the quantity of goods that can be imported: Imports
greater than the quota amount are forbidden or heavily taxed (Ch. 9) 36. Private
Cost: Cost paid by the consumer or the producer (Ch. 10)
37. External Cost: Cost paid by people other than the consumer or the producer
trading in the market (Ch. 10)
38. Social Cost: The cost to everyone: the private cost plus the external cost (Ch.
10)
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1. Incentives: Rewards and penalties that motivate behavior (Ch. 1)
2. Opportunity Cost: Of a choice, the value of the opportunities lost (Ch. 1)
3. Inflation: Increase in the general level of prices (Ch. 1)
4. Absolute Advantage: Ability to produce the same good using fewer inputs than
another producer (Ch. 2)
5. Production Possibilities Frontier: Shows all the combinations of goods that a
country can produce given its productivity and supply of inputs (Ch. 2)
6. Comparative Advantage: In producing goods for which (a country) has the
lowest opportunity cost (Ch. 2)
7. Demand Curve: Function that shows the quantity demanded at different prices
(Ch. 3)
8. Quantity Demanded: Quantity that buyers are willing and able to buy at a
particular price (Ch. 3)
9. Consumer Surplus: The consumer's gain from exchange, or the difference
between the maximum price a consumer is willing to pay for a certain quantity
and the market price (Ch. 3)
10. Total Consumer Surplus: Measured by the area beneath the demand curve
and above the price (Ch. 3)
11. Normal Good: Good for which demand increases when income increases (Ch.
3)
12. Inferior Good: Good for which demand decreases when income increases (Ch.
3)
13. Substitutes: A decrease in the price of one good leads to a decrease in demand
for the other good (Ch. 3)
14. Complements: A decrease in the price of one good leads to an increase in the
demand for the other good (Ch. 3)
15. Supply Curve: Function that shows the quantity supplied at different prices (Ch.
3)
16. Quantity Supplied: Amount of a good that sellers are willing and able to sell at
a particular price (Ch. 3)
17. Producer Surplus: Producer's gain from exchange, or the difference between
the market price and the minimum price a which a producer would be willing to
sell a particular quantity (Ch. 3)
18. Total Producer Surplus: Measured by the area above the supply curve and
below the price (Ch. 3)
19. Surplus: Situation in which the quantity supplied is greater than the quantity
demanded (Ch. 4)
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, Modern Principles: Microeconomics
20. Shortage: Situation in which the quantity demanded is greater than the quantity
supplied (Ch. 4)
21 Equilibrium Price: Price at which the quantity demanded is equal to the quantity
supplied (Ch. 4)
22. Equilibrium Quantity: Quantity at which the quantity demanded is equal to the
quantity supplied (Ch. 4)
23. Elasticity of Demand: Measures how responsive the quantity demanded is to
a change in price; more responsive equals more elastic (Ch. 5)
24. Elasticity of Supply: Measures how responsive the quantity supplied is to a
change in price (Ch. 5)
25. Great Economic Problem: To arrange our limited resources to satisfy as many
of our wants as possible (Ch. 7)
26. Speculation: Attempt to profit from future price changes (Ch. 7)
27. Futures: Standardized contracts to buy or sell specified quantities of a
commodity or financial instrument at a specified price with delivery set at a
specified time in the future (Ch. 7)
28. Prediction Market: Speculative market designed so that prices can be
interpreted as probabilities and used to make predictions (Ch. 7) 29. Price
Ceiling: Maximum price allowed by the law (Ch. 8)
30. Deadweight Loss: Total of lost consumer and producer surplus when not all
mutually profitable gains from trade are exploited. Price ceilings create a
deadweight loss. (Ch. 8)
31. Rent Control: Price ceiling on rental housing (Ch. 8)
32. Price Floor: A minimum price allowed by law (Ch. 8)
33. Protectionism: Economic policy of restraining trade through quotas, tariffs, or
other regulations that burden foreign producers but not domestic producers (Ch.
9)
34. Tariff: A tax on imports (Ch. 9)
35. Trade Quota: Restriction on the quantity of goods that can be imported: Imports
greater than the quota amount are forbidden or heavily taxed (Ch. 9) 36. Private
Cost: Cost paid by the consumer or the producer (Ch. 10)
37. External Cost: Cost paid by people other than the consumer or the producer
trading in the market (Ch. 10)
38. Social Cost: The cost to everyone: the private cost plus the external cost (Ch.
10)
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