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C
Comparative Advantage
The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than another producer.
Complementary Goods
Products that are typically used together, so that an increase in the price of one leads to decreased demand for the other.
Consumer Surplus
The difference between what consumers are willing to pay for a good and what they actually pay.
Cross-Price Elasticity of Demand
A measure of how the quantity demanded of one good responds to a change in the price of another good.
D
Deadweight Loss
The loss of economic efficiency that occurs when the equilibrium outcome is not achievable or not achieved, often due to taxes, subsidies, or price controls.
Demand Curve
A graph showing the relationship between the price of a good and the quantity demanded, typically sloping downward.
Diminishing Marginal Utility
The principle that as a person consumes more units of a good, the additional satisfaction gained from each extra unit decreases.
E
Economies of Scale
The cost advantage a firm experiences as it increases its level of output, because average costs fall as production expands.
Elasticity
A measure of how much the quantity demanded or supplied of a good responds to a change in price or another economic factor.
Externality
A cost or benefit of an economic activity experienced by a third party who did not choose to incur that cost or benefit, such as pollution.
M
Marginal Cost
The additional cost incurred from producing one more unit of a good or service.
Marginal Revenue
The additional revenue generated from selling one more unit of a good or service.
Market Equilibrium
The point at which the quantity of a good demanded equals the quantity supplied, determining the market price.
Market Failure
A situation in which the free market fails to allocate resources efficiently, often due to externalities, public goods, or monopoly power.
Monopolistic Competition
A market structure with many firms selling similar but differentiated products, each having some control over price.
Monopoly
A market structure in which a single firm is the sole producer of a good or service with no close substitutes, giving it significant control over price.
P
Perfect Competition
A market structure with many buyers and sellers of an identical product, none of whom can influence the market price.
Price Ceiling
A government-imposed maximum price for a good or service, set below the equilibrium price, often leading to shortages.
Price Elasticity of Demand
A measure of how much the quantity demanded of a good changes in response to a change in its price.
Price Floor
A government-imposed minimum price for a good or service, set above the equilibrium price, often leading to surpluses.
Producer Surplus
The difference between the price producers receive for a good and the minimum price they would have been willing to accept.
Production Possibilities Frontier (PPF)
A graph showing the maximum possible output combinations of two goods an economy can produce given its resources and technology.
Public Good
A good that is both non-excludable and non-rivalrous, meaning one person's use doesn't reduce availability to others and no one can be effectively excluded from using it.
S
Scarcity
The fundamental economic problem of having seemingly unlimited human wants in a world of limited resources.
Substitute Goods
Products that can be used in place of one another, so that an increase in the price of one leads to increased demand for the other.
Supply Curve
A graph showing the relationship between the price of a good and the quantity supplied, typically sloping upward.