IB Economics SL/HL Unit 2 (Microeconomics)

States that the quantity demanded for a good or service decreases as price increases and vice versa.

States that as the price of a product falls, consumers' real income increases and more will be bought.

States that as the price of a product increases, more consumers will choose it over rivals and more will be bought.

Goods or services that compete against each other and are hence in competitive demand.

A change in a non-price determinant changes the quantity.

The amount of goods and services producers are willing and able to provide.

States that the quantity supplied is directly proportional to price.

As more factors of production are utilized, each additional unit brings declining returns.

The output of one good or service prevents the output of another.

The output of one good or service increases the output of another.

The interactions between consumers and producers that allocate resources and determines prices of goods and services.

Provides information to consumers and producers on where resources should be allocated.

Provides motivation for consumers and producers to change their behavior to maximize profits.

Ensures scarce goods and services deter consumers by raising prices.

The gain of all consumers who can consume a product at a lower price than what they were willing and able to pay.

The sum of consumer and producer surplus.

The social optimum when resources are distributed in the most effective and beneficial way.

The assumption that all consumers make the most rational decisions.

A situation where an economic agent has incomplete information on the product they're buying/selling.

The idea that consumers do not always have the capability to make perfectly rational decisions.

The idea that consumers are not always completely selfish, in contrast to traditional economic theory.

The idea that consumers may give in to their temptations and consume products they know are not maximizing their utility.

General rules consumers stick to when faced with a lack of information regarding a product.

A cognitive bias where consumers over-rely on information they've received in the past, rather than current information.

A cognitive bias where consumers decide on products based on how positively (or negatively) they are portrayed.

A cognitive bias where consumers decide on products based on what information they can first remember is associated with the product.

The study of how choices can be presented in a way that influences which choice is taken.

Ways to influence consumers into choosing something, without actively restricting their choices; They are simply "nudged" into the "right" direction.

The consideration firms make on how they impact society and the environment.

A measure of how quantity demanded for a product varies based on income.

Goods with a negative income elasticity (as incomes increase, less will be demanded)

Goods with an income elasticity between 0 and 1 (as incomes increase, more will be demanded, but less than the proportionate change).

Goods with an income elasticity of more than 1 (as incomes increase, more will be demanded, and more than the proportionate change).

A payment taken indirectly from consumers by charging for their expenditure on goods and services.

A fixed amount of tax on a good or service.

A percentage tax on a good or service.

Arises when government intervention causes more social costs than benefits.

The inability of the free market to achieve allocative efficiency.

The additional value gained by households or firms when consuming/producing an extra unit of a good or service.

The additional expense incurred by households or firms when consuming/producing an extra unit of a good or service.

The additional value gained by society when consuming/producing an extra unit of a good or service.

The additional expense incurred by society when consuming/producing an extra unit of a good or service.

Non-excludable but rivalrous resources.

Government-regulated tradable contracts that allow for pollution. They can be traded amongst firms to result in a more socially optimum level.

Financial assistance from the government to firms that lower their costs of production, in order to increase output.

Goods for consumption that are non-excludable and non-rivalrous.

The issue that arises when people that do not pay for a good or service have access to it.

The issue that arises when the seller has more information about the good or service than the buyer, or vice versa.

A market situation where buyers and sellers have more information than the other, leading to the party with the most information making optimal decisions for themselves, at the cost of the other party.

A market situation where a buyer or seller protected from risk makes optimal decisions for themselves, at the cost of the other party.

A market structure with many firms holding no market power, no barriers to entry, and homogeneous products.

A market structure with many firms holding little market power, low barriers to entry, and differentiated products.

A market structure with a few large firms holding significant market power, high barriers to entry, and differentiated products.

A market structure where oligopolistic firms engage in practices to restrict competition by price fixing or limiting output.

A market structure with one large firm holding all market power, high barriers to entry, and no close substitute products.

A market structure where only one large firm is able to operate with profit.

Expenses that change with output of a good or service.

When a firm produces at the largest possible difference between total revenue and total costs.

The issue of income being unequally distributed in a country.

The issue of assets being unequally distributed in a country.

The amount of goods and services consumers are willing and able to purchase.

As more of a product is consumed, each additional unit brings declining satisfaction, and consumers are only willing to buy more at lower prices.

The sum of all individual demand for a good or service.

Goods or services that are jointly demanded.

A change in price changes the quantity.

The cost of producing one additional good or service.

= (Change in TC) / (Change in Q)

The sum of all individual supply for a good or service.

When there is excess demand for a good or service.

When there is excess supply for a good or service.

The gain of all producers who can produce a product at a higher price than what they were willing and able to earn.

A situation where an economic agent has complete information about everything related to the product they're buying/selling.

A measure of how quantity demanded for a product varies based on price.

A measure of how quantity supplied for a product varies based on price.

Government regulations that set a maximum price for a good or service.

Government regulations that set a minimum price for a good or service.

Benefits of a good or service enjoyed by a third party not directly involved in an economic transaction.

Costs of a good or service experienced by a third party not directly involved in an economic transaction.

Goods and services that create positive externalities when produced or consumed

Goods and services that create negative externalities when produced or consumed

A tax on greenhouse gas emissions that aim to reduce pollution.

The ability of a firm to manipulate prices of a good or service.

The money gained by a firm for selling their goods and services.

Expenses that do not change with output of a good or service.

The money remaining after expenses have been subtracted from revenue.

= TR - TC

The additional revenue when producing one additional unit of a good or service.

= (Change in TR) / (Change in Q)

Profit left after accounting for costs, incentivizing the entry of new firms into the market.

When the cost of production equals the revenue of selling.