Microeconomics Key Terms

A Latin expression meaning “other things being equal”.

A multidimensional concept relating to the level of prosperity and quality of living standards in a country.

In general, involves making the best use of scarce resources. May refer to
producing at the lowest possible cost or to allocative efficiency where marginal
social costs are equal to marginal social benefits or where social surplus is
maximum.

The concept or idea of fairness.

Resources used in the production of goods and services; include land (natural resources), labour, capital and entrepreneurship.

An economy where the means of production are privately owned and where market forces determine the answers to the fundamental questions (what/how much, how and for whom) that all economies face.

The view that if market forces are left alone unimpeded by government intervention the outcome will be efficient.

One of the four factors of production that refers to the natural resources with
which an economy is endowed; also referred to as “gifts of nature”.

The extra or additional benefit enjoyed by consumers that arises from consuming one more unit of output.

The extra or additional costs of producing one more unit of output.

Any arrangement where buyers and sellers interact to carry out an economic transaction.

Deals with areas of the subject that are open to personal opinion and belief, thus not subject to refutation.

The next best alternative foregone when an economic decision is made.

Deals with areas of the subject that are capable of being falsified, or shown to be correct or not.

A curve showing the maximum combinations of goods or services that can be produced by an economy in a given time period, if all the resources in the economy are being used fully and efficiently and the state of technology is fixed.

A method used in the natural sciences and social sciences where any proposition must be subjected to an empirical test in order to see if it can be disproven or refuted. If it is disproven or refuted, then the proposition must be rejected.

The limited availability of economic resources relative to society’s unlimited needs and wants of goods and services.

Refers to when a firm or country focuses on the production of one or a few goods or services. This forms the basis of theory of comparative advantage in international trade.

An individual or group of individuals who have an interest, or stake, in an economic activity or outcome.

Refers to the preserving of the environment so that it can continue to satisfy needs and wants into the future. Relates to the concept of “sustainable development”.