Microeconomics Vocabulary

the relationship between availability and desire that determines price

“Supply and demand set the equilibrium price of wheat.”

Origin: From supply (Latin supplere `to fill up`) + demand (Latin demandare `to entrust`)

the responsiveness of demand or supply to price changes

“Luxury goods have high price elasticity of demand.”

Origin: Greek elastikos `propulsive`, from elaunein `to drive`

the cost of producing one additional unit

“Firms maximize profit where marginal cost equals marginal revenue.”

Origin: From marginal (Latin margo `edge`) + cost

a state where supply equals demand

“The market reaches equilibrium at $50 per unit.”

Origin: Latin aequilibrium, from aequus `equal` + libra `balance`

the fundamental economic problem of unlimited wants and limited resources

“Scarcity forces societies to make allocation choices.”

Origin: Old French escarsete, from escars `scanty`

the satisfaction or benefit derived from consuming a good

“Economists measure utility to understand consumer choices.”

Origin: Latin utilitas `usefulness`, from uti `to use`

a market with only one seller

“The utility company operates as a regulated monopoly.”

Origin: Greek monopolion, from monos `single` + polein `to sell`

a market dominated by a few large sellers

“The airline industry is an oligopoly.”

Origin: Greek oligos `few` + polein `to sell`

a market with many buyers and sellers trading identical products

“Agricultural commodities approach perfect competition.”

Origin: From perfect + competition (Latin competere `to strive together`)

charging different prices to different customers for the same product

“Student discounts are a form of price discrimination.”

Origin: From price + discrimination (Latin discriminare `to divide`)