Economics: Microeconomics Essentials

What is the Law of Demand?

The principle that, ceteris paribus, as the price of a good increases, the quantity demanded decreases, and vice versa.

Define market equilibrium.

The state where the quantity of a good supplied equals the quantity demanded at a specific price.

What are fixed costs in production?

Costs that do not change regardless of the level of output produced, such as rent or insurance.

What is a monopoly?

A market structure characterized by a single seller of a product with no close substitutes.

Define the two primary characteristics of public goods.

Public goods are non-excludable (cannot prevent use) and non-rivalrous (one person's use doesn't reduce availability).

What is marginal utility?

The additional satisfaction or benefit a consumer gains from consuming one more unit of a good or service.

How is the Price Elasticity of Demand (PED) calculated?

The percentage change in quantity demanded divided by the percentage change in price.

What is consumer surplus?

The difference between the maximum price a consumer is willing to pay and the actual price they pay.

Explain the Law of Diminishing Marginal Returns.

As more of a variable input is added to fixed inputs, the additional output produced eventually decreases.

What are the key characteristics of perfect competition?

Many buyers and sellers, homogeneous products, perfect information, and free entry and exit from the market.