A Glossary of Microeconomic Terms 07/09/2022, 10:23 AM

A Glossary of Microeconomics Terms

© 1999-2020, Douglas A.Ruby (05-22-2020)

1. Abnormal Profits -- Profits earned by a business firm over and above

the opportunity cost of the factor inputs. The excess of revenue over
the total costs of production -- costs that include a normal profit for
entrepreseurship.
2. Absolute Advantage -- A situation where an economic agent, region
or country can produce a good with a smaller quantity of inputs
relative to other agents.
3. Asymmetric Information -- A situtation where one economic agent
has access to information that is hidden or unavailable to other agents.
4. Average Cost Pricing -- An approach to regulating a monopolist
allowing a normal rate of return or profit even at the expense of a less
than efficient level of output being produced.
5. Average Fixed Cost (AFC) -- Total fixed costs divided by the level of
output. As output increases, these per-unit fixed costs asymtotically (sp) decrease.
6. Average Productivity (AP) -- The total level of output in production divided by the quantity of labor
input.
7. Average Total Cost (ATC) -- Total costs divided by the level of output. Equal to Average Fixed
Costs + Average Variable Costs.
8. Average Variable Cost (AVC) -- Variable costs divided by the level of output. With diminishing
marginal productivity, these per-unit costs tend to rise with output.
9. Abundance -- A physical or economic condition where the quantity available of a resource exceeds
the quantity desired in the absence of a rationing system.
10. Barriers to Entry -- Economic, natural or physical conditions that make it difficult and maybe
impossible for new firms to enter a market and compete away any abnormal profits that may exist.
11. Budget Constraint -- The limit on the the purchasing power of consumer income determined by
existing market determined prices of goods and services.
12. Budget Set -- Different bundles of goods and services that are attainable to the consumer at given
market prices and the consumer's fixed level of income.
13. Capital Intensive Production -- Long run production relationship that use more capital relative to
other factor inputs.
14. Change in Consumer Surplus -- A measure of the change in consumer welfare due to the change in
the price of a good.
15. Change in Producer Surplus -- A measure of the change in producer welfare (contribution to fixed
cost and profit) due to changes in market price.
16. Cobb-Douglas Production Function -- A multiplicative mathematical relationship among the level
of technology and several factor inputs. Output elasticities are determined by individual exponents
on factor input variable.
17. Comparative Advantage -- A situation where one economic agent, region or country can produce a
good at a lower opportunity costs relative to other agents.
18. Competition -- The process of consumers bidding prices upwards or producers cutting prices in
order to allow those agents to be involved in a market trade.
19. Complementary Goods -- A pair of goods where the quantity demanded of one increases when the
price of a related good decreases.
20. Complete Preferences -- The ability of a consumer to fully identify his/her preference for any
combination or bundle of goods and services.

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21. Constant Elastiticy of Substitution (CES) -- A mathematical form for a production function that is
additive in the inputs each with it's own elasticity exponent.
22. Constant Returns to Scale (CRS) -- A long run production concept where a doubling of all factor
inputs exactly doubles the amount of output.
23. Consumer (household) -- An economic agent that desires to purchase goods and services with the
goal of maximizing the satisfaction from consumption of those goods and services.
24. Constraint -- A resource limit placed on the values of the objective variables in an optimization
problem.
25. Consumer Optimum -- Identification of an attainable bundle of goods that maximizes a consumer's
level of satisfaction given his/her level of income and market prices.
26. Consumer/ Households -- Economic agent(s) who buy goods and services from output markets and
sell factor inputs to input/factor markets.
27. ConsumerExpenditure -- Spending on goods and services.
28. Consumers -- Economic agent(s) who buy goods and services from output markets and sell factor
inputs to input/factor markets.
29. Costs (of Production) -- The cost of all factor inputs (land, labor, capital and enterpreneurship) used
in the product and sale of goods and services.
30. Consumer's Surplus -- The difference between what a consumer is willing to pay for each unit of a
commodity consumed and the price actually paid.
31. Cross-Price Elasticity of Demand -- A measure of sensitivity in the quantity demanded of one goods
in reaction to changes in the price of a related good.
32. Deadweight Loss -- A measure of inefficiency in resource allocation caused by market distortions.
This loss occurs when the price (marginal benefit) differs from the marginal costs.
33. Decreasing Returns to Scale (DRS) -- A long run production concept where a doubling of all factor
inputs results in less than double the amount of output.
34. Demand -- A relationship between market price and quantities of goods and services purchased in a
given period of time. Represents the behavior of buyers in the market place.
35. Demand for Loanable Funds -- The use of funds available in financial markets (direct finance and
financial intrmediaries) for expenditure on physical capital, plant and equipment or business
inventories.
36. Desired Capital Stock -- The profit maximizing amount od capital based on the derived demand for
capital (marginal productivity x the price of the good produced) and the rental cost of capital.
37. Diminishing Marginal Productivity (DMP) -- A short run production concept where increases in the
variable factor of production lead to less and less additional output.
38. Diminishing Marginal Utility (DMU) -- An economic concept that refers to the notion that
additional units consumed of a particular commodity provide less and less additional satisfaction
relative to previous units consumed.
39. Dominant Strategy -- A game theoretic outcome where the choice of one player is the same
independent of choices made by other players in the game.
40. Economic Agent -- A decision maker involved in any type of economic activity.
41. Economics -- The study of how a given society allocates scarce resources to meet the unlimited
wants and need of its members.
42. Economic Bads -- Output that is not desired by economic agents (i.e., pollution, risk, ...).
43. Economics Barriers to Entry -- Barriers that prevent new firms from entering a market due to lack
of access to raw materials or production technology.
44. Economic Goods -- Output that is desired by economic agents.
45. Economic Welfare -- The sum of producer surplus and consumer surplus generated by market
activity. For each unit traded, this welfare is the difference between the marginal value of a good
and marginal (opportunity) cost.
46. Edgeworth Box -- An analytical tool used to study the behavior of two economic agents based on

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preferences for goods and services when production of those goods is held constant.
47. Efficiency -- A situation in the allocation of resources where the benefits of consuming one more
unit exactly equal the (social and private) costs or producing that good.
48. Equilibrium -- A condition where there is no tendency for an economic variable to change.
49. Expenditure -- The amount spent by a consumer on a bundle of goods or services (the product of
market price and quantity demanded).
50. Efficiency -- A market outcome where economic welfare is maximized -- where the price (marginal
benefit) of a product traded is equal to the marginal (opportunity) cost of production.
51. Efficient Production -- Using factor inputs consistent with the marginal contribution to revenue
being equal to their marginal (opportunity) cost. A condition where an increase in the production of
one good required factor inputs to be reallocated from production of other goods.
52. Elasticity of Substitution -- The degree by which one factor input can be substituted for another as
relative factor prices change.
53. Endowment (point) -- An initial reference bundle of income in the present or future or initial
possession of goods by an economic agent.
54. Exchange -- The trading of goods and services. In the market, the buying and selling of goods and
services.
55. Excise Tax -- A per-unit tax applied (added) the the price of a product sold.
56. Factors of Production -- An exhaustive list of inputs required for any type of production.
57. Factor Prices -- The payments made to the factors of production (rents, wages, interest, and profits).
58. Factor Substitution -- Using one factor of production as a substitute for another holding the level of
output constant.
59. Final Goods and Services -- Goods and services that are purchased for direct consumption.
60. Fixed Costs of Production -- Those costs of production that are independent of production levels in
the short run.
61. Fixed Factors of Production -- A short run concept where among the various factors of production,
only one factor may vary. The others are used in fixed quantities.
62. Flow Variable -- A variable that is measured per unit of time.
63. Gains from Trade -- The benefit from specializing based on comparative advantage and trading for
other goods.
64. Game Theory -- A modeling technique that accounts for strategic behavior of economic agents
reacting to the actions of others.
65. General Equilibrium Analysis -- The study of equilibrium outcomes taking into account several
markets, agents and/or inputs.
66. Heterogeneous Goods -- Goods (and services) that have real or perceived differences in quality or
personal appeal among different consumers.
67. Homogeneous Goods -- Goods (and services) that are identical among key qualitiative metrics.
68. Imperfectly Competitive Firm -- A firm operating in an industry where barriers to entry exist or
heterogeneous products are sold. A firm with some degree of price-making power.
69. Incentives -- Characteristics or attributes that lead to participation in the production process or
participation as a buyer of certain products.
70. Income Effect -- A reaction of consumer's demand for goods or services due to changes in
purchasing power holding relative prices constant (see Substitution Effect).
71. Income Elasticity of Demand -- A measure of sensitivity of quantity demanded to changes in
consumer income.
72. Income-Neutral Good -- A good where quantity demanded is unchanged when consumer income
changes.
73. Increasing Returns to Scale (IRS) -- A long run production concept where a doubling of all factor
inputs more than doubles the amount of output.
74. Indifference Curve -- A set of points that represent different bundles of goods which provide the

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consumer with the same level of satisfaction (or utility).

75. Individual Preferences -- The ability of an economic agent (consumer) to rank or order different
bundles of goods based on quantity and quality.
76. Industry -- A collection of firms (or single) firm producing and selling products with common
attributes.
77. Inefficient Production -- A production outcome where it is possible to produce more output with
available technology or resources.
78. Inferior Good -- A good where quantity demanded decreases when consumer income increases
(there is an inverse relationship between quantity demanded and income).
79. Intermediate Goods and Services -- Goods (or services) used to produce other goods (i.e., capital
equipment).
80. Inflation -- An increase in the aggregate price level -- all prices rising. Typically measured via the
Consumer Price Index, Producer Price Index or GDP Deflator.
81. Intermediate (Capital) Goods -- Good that are used to produce other goods. Intermediate goods are
not intended for final consumption by consumers or households.
82. Inverse Demand -- Demand is expressed with quantity demanded as the dependent variable and
market price as the independent variable. Inverse demand reverses this relationship and is used in
models where quantity is the independent variable (costs and profit maximization).
83. Investment -- The addition to the capital stock. Gross investment is the total additon, net investment
is addtions to the capitl stock over and above replacement of worn-out capital.
84. Investment Expenditure -- The dollar value of additions to the capital stock.
85. Iso-Cost Line -- A line of equal costs. Often used in models of long run production using market
determined factor prices.
86. Iso-Profit Line -- A line of equal profits. Often used in models of short run production using the
market determined factor price of a variable input and the market determined price of the output
being produced and sold.
87. Labor Demand (curve) -- The derived demand for labor based on marginal productivity and the
price of the output being produced.
88. Labor Intensive Production -- Long run production relationship that use more labor relative to other
factor inputs.
89. Labor Supply (curve) -- The availability of labor at different real wage rates based on individual
preferences for earning income or buying leisure by not working.
90. Legal Barriers to Entry -- Restrictions on market-entry of new firms defined by various
governmental institutions. Included permits, patents and other restrictions on trade.
91. Leontief Production Technology -- A production technology where factor inputs are used in fixed
proportion (i.e., one bus / one driver). Substitution among inputs is not possible.
92. Lexicographic Preferences -- Preferences that can be strictly ranked --usually applies in situations
where only one good in a bundle is preferred by the consumer.
93. Linear Demand -- A demand relationship often used for expository purposes to highlight the inverse
nature of demand and the effects of exogenous shocks to the buying-side of the market.
94. Linear Production Technology -- A productin technology where perfect-substitution among inputs is
possible.
95. Long Run Production -- Production activity where all factors of production may vary in quantity.
The firm has the freedom to substitute among these factors or production in attempts to minimize
costs.
96. Marginal Rate of Substitution -- The rate by which a consumer may substitute a quantity of one
good for another holding his/her level of utility constant.
97. Losses -- An outcome for the firm where the total costs of production exceed total revenue from the
sale of a good or service.
98. Marginal Cost Pricing -- Pricing for efficient outcomes. Sometimes used in the regulation of a

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monopolist placing a maximum on price charged and leading to more output being made available
to the market.
99. Marginal Costs -- The cost of producing one more unit of a good in the short run. A measure of the
opportunity costs of the variable inputs in their next best use.
100. Marginal Productivity (MP) -- The incremental addition to output from the addition of one more
unit of input.
101. Marginal Productivity of Labor -- The incremental addition to output from the addition of one more
unit of input of labor.
102. Marginal Rate of Substitution (MRS) -- The degree by which one good may be substituted for
another holding utility or consumer satisfaction constant.
103. Marginal Rate of Technical Substitution (MRTS) -- The degree by which one factor input may be
substituted for another holding the level of output constant.
104. Marginal Rate of Transformation (MRT) -- The degree by which one good may be produced and the
expense of another given available quantities of factor inputs and the level of technology.
105. Marginal Revenue -- The revenue generated to a firm by selling one more unit of a good or service.
106. Marginal Revenue Product (MRP) -- The contribution to the revenue of a firm by using one more
unit of a factor input.
107. Marginal Utility -- The satisfaction a consumer receives by consuming one more unit of some good
or service.
108. Market -- A place or institution where buyers and sellers come together and exchange factor inputs
or final goods and services. A market is one particular type of economic rationing system.
109. Market Entry -- A new firm to join an industry in attempt to compete away the profits of existing
firms.
110. Market Exit -- A firm departing an industry due to losses -- often operating losses that exceed fixed
costs.
111. Maximin Strategy -- An alternative strategy among various options avaible based on maximizing
the minimum possible payoff based on choices made by competing firms.
112. Microeconomics -- The study of individual household, business firm or other economic agent's
behavior. Sometimes known as price theory.
113. Monopolistic Competition -- A market structure similar to perfect competition in that there are a
large number of firms competing in a given industry. However, each firm is selling a differentiated
product and may exploit brand preferences such that is may act as a monopolist with respect to its
own customers.
114. Monopoly -- A market structure where only one firm exists in a given industry. This firm has a high
degree of market power such that it is able to act as a price-makerwith respect to market prices.
115. Natural Barriers to Entry -- Restrictions on market-entry of new firms based on cost structure.
These barriers exist when a single firm can produce at lower average cost when compared to the
combined average cost of several firms operating in an industry.
116. Needs -- Goods and services essential for human survival.
117. Negotiation Space -- A set of consumption bundles (points) relative to an initial or current
endowment where one or all consumers can be made better off through trade without harming any
other consumers.
118. Net Present Value -- The Present Value, discounted at some relevant market interest rate, of an asset
less acquisition and depreciation costs.
119. Non-Satiation -- A situation where consuming more of a good asymptotically provides for utility or
satisfaction.
120. Normal Good -- A good where quantity demanded increases when consumer income increases (a
direct relationship between quantity demanded and income).
121. Normal Profits -- The return to entrepreneurship that just cover the opportunity cost of the
entrepreneur's time and effort.

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122. Objective Function -- A mathematical expression, usually additive, of the objective variables in an
optimization problem.
123. Oligopoly -- A market structure with only a few firms in a given industry.
124. Opportunity Cost -- The value of a resource applied to its next best use.
125. Optimization -- The process of maximizing or minimizing some value (profits, utilty, costs) subject
to a resource constraint(s).
126. Ordinal Utility -- A ranking of utility or satisfaction among the consumption of several bundles of
goods and services.
127. Pareto Efficient -- An exchange outcome where it is no longer possible to make one economic agent
better off without making another agent worse off.
128. Pareto Improvement -- A process of exchange where one economic agent/consumer is made better
off by a trade without harming the other agent/consumer.
129. Pareto Optimum -- A situation where it is not possible to exchange goods or services without
harming one of the agents involved.
130. Partial Equilibrium Analysis -- The determination of an equilibrium condition in a single market or
setting holding activity on all other markets constant.
131. Payoff Matrix -- A multi-dimensional grid of payoffs to several players in a game based on
simultaneous choices.
132. Perfect Competition -- A market structure where many firms exist, each with a small percentage of
market share selling a homogeneous product. These firms are all price-takerswith no influence on
market price.
133. Perfectly Competitive Firm -- A firm producing a homogeneous good in a market with very low
barriers to entry with no influence on price -- the firm is a price-taker.
134. Physical Capital -- An income-producing asset that is used to produce goods and services (see
intermediate good).
135. Preferences -- A ranking or ordering of different bundles of goods based on quantity and quality by
an economic agent / consumer.
136. Price Discrimination -- The ability of a price-making firm to charge a different prices to different
consumers for a common (homogenous) good or services.
137. Price Discrimination (1st degree) -- The ability by a firm with price-making power to charge a
different price to each buyer.
138. Price Discrimination (2nd degree) -- Charging different prices to different consumers based on
quantity discounts.
139. Price Discrimination (3rd degree) -- Charging different prices to consumers in separate markets
without any arbitrage opportunities possible among the buyers.
140. Price Elastic Demand -- When the percentage change in quantity demanded exceeds the percentage
change in market price.
141. Price Elasticity of Demand -- A measure of sensitivity of quantity demanded to changes in market
price.
142. Price Elastic Supply -- Supply decisions that are very sensitive to changes in market price.
143. Price Elasticity of Supply -- A measure of the price-sensitivity of quantity supplied in the market.
144. Price Elasticity -- A measure of price-sensitivity among buyers or sellers in the market -- price
changes lead to significant changes in quantity supplied.
145. Price Inelastic Demand -- When the percentage change in quantity demanded is less than the
percentage change in market price.
146. Unitary-elastic Demand -- When the percentage change in quantity demanded is exactly equal to
the percentage change in market price.
147. Producer (business firm) -- An economic agent that converts inputs (factors of production) into
output (goods and services) with the goal of maximizing profits from production and sale of those
goods and services.

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148. Price Inelastic Supply -- Supply decisions that are highly insensitive to changes in market price --
price changes lead to very small changes in quantity supplied.
149. Price-maker -- A firm that has some control over the price it charges for a good or service in the
market-place.
150. Price-taker -- A firm that has little control over the price it charges for a good or service in the
market-place.
151. Prisoner's Dilemma -- An outcome in a game-theoretic situation where the dominant strategies of
all players leads to something other than a Pareto efficient outcome.
152. Producer Optimum -- A choice of input combinations or output levels that maximize the profits of a
producer taking all prices as a given.
153. Producer's Surplus -- The difference between revenue received and the variable costs of production
for each unit of a commodity sold. Represents a contribution to fixed costs and producer profits.
154. Producers -- Economic agents that use factor inputs and convert these inputs into desired goods and
services (output).
155. Producers (Business Firms) -- Economic agents that buy factor inputs and convert these input into
desired goods and services for sale in the market-place.
156. Production -- The process of converting (factor) inputs into output.
157. Production Function -- A technical relationship between a certain level of factor inputs and the
corresponding level of output.
158. Production Isoquant -- A long run concept. A line or curve of equal output made possible with
various combinations of factor inputs.
159. Production Possibilities Frontier -- A relationship between two types of output defining the tradeoff
that exists in allocating resources from production of one good to the other.
160. Profits -- The difference between sales revenue and the costs of production.
161. Profit Maximization -- Production, output, and pricing decisions that maximize the difference
between sales revenue and production costs.
162. Profit Maximizing Behavior -- The assumed goal of the business firms, making decisions that
maximize the difference between sales revenue and production costs.
163. Quantity Demanded -- The amount of a good or services that a consumer chooses to buy at each
and every market-price.
164. Quantity Supplied -- The amount of a good or services that a producer chooses to sell at each and
every market-price.
165. Rate of Time Preference -- A personal interest rate used to discount preferences for future economic
activity for comparison to current economic activity. A rate of time preference of zero indicates that
the agent weights all time periods equally.
166. Rationing Systems -- A process used to match the desire for goods and services with their
availability.
167. Real Wage -- The payment to a unit of labor input relative to the price of output. The amount of
output a worker could buy with one unit (hour, day, week) of work. The nominal wage divided by
output price.
168. Regulated Losses -- An outcome where a monopolist is regulated based on efficiency criteria that
lead to per-unit costs being greater than the price charged.
169. Regulated Profits -- An outcome where the efficiency condition is relaxed for a monopolist allowing
for a normal rate of return.
170. Regulation -- Activity by government or public sector agent to influence or control the level of
production, the means of production or prices charged in the market.
171. Relative Prices -- A ratio of any two prices or one particular price compared to a price index.
172. Resources -- The raw materials and other factors of production that enter the production process or
final goods and services that are desired by economic agents.
173. Rental Cost of Capital -- The cost of a unit of capital per-unit of time based on borrowing costs,

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opportunity costs, depreciation costs and the price of capital.

174. Representative Firm -- A firm in a perfectly competitive or monopolistically competitive industry
with a cost structure is representative of the industry average.
175. Resource Allocation -- Decisions about how to use (scarce) resources to meet the wants and needs
of economic agents.
176. Returns to Scale -- A long run relationship between changes in output relative to changes in the
required quantity of inputs.
177. Revenue The -- amount received by a producer from the sale of goods and services (the product of
market price and quantity sold).
178. Risk -- A measure of uncertainty about the value of an asset or the benefits of some economic
activity.
179. Satiation -- A level of consumption where the consumer is fully satisfied in a given period of time.
180. Savings -- The difference between income earned and consumption spending by an economic agent.
181. Scarcity -- A physical or economic condition where the quantity desired of a good or service
exceeds the availability of that good or service in the absence of a rationing system.
182. Shortage -- A market condition where the quantity demanded of a particular good or service exceed
the quantity available.
183. Short Run -- Production activity where only one factor of production may vary in quantity -- the
other factors are used in fixed quantities. The firm does not have the freedom to substitute among
these factors.
184. Short Run Production -- Production activity where only one factor of production may vary in
quantity. All other factors of production are fixed in quantity. Substitution among factors is not
possible.
185. Specialization -- A situation where a producer uses all available resources to produce a single good
in the expectation of being able to trade for other desired goods.
186. Speculation -- The purchase of a good or asset not intended for final consumption but rather in the
expectation of future sale at some higher price.
187. Stage I (of Production) -- A short run production concept where the average productivity of the
variable input is rising. Usually an indication, depending on demand for the product, that there is
too much of the fixed factors available or too little of the variable factor being used.
188. Stage II (of Production) -- A short run production concept where the average productivity of the
variable input is falling but the marginal productivity is still positive. The is the desired range of
production for the firm.
189. Stage III (of Production) -- A short run production concept where the marginal productivity of the
variable input is negative. This is an indication that the fixed factors of production are overwhelmed
by too much of the variable factor.
190. Strategy -- A decision rule by an economic agent informed by joint payoffs in a competitive
situation.
191. Stock Variable -- A variable measured at point in time.
192. Substitution Effect -- The reaction of a consumer's demand for goods based on changes in relative
prices holding purchasing power (or utility) constant (see Income Effect).
193. Substitute Goods -- A pair of goods where the quantity demanded of one increases when the price
of a related good also increases.
194. Supply -- A relationship between market price and quantities of goods and services made available
for sale in a given period of time.
195. Supply Curve (for the firm) -- A line or curve that indicates output and selling choices for a firm at
each and every market price.
196. Supply of Loanable Funds -- The equivalent of savings-- funds available in financial markets (direct
finance or financial intermediaries) for lending to support the accumulation of capital or other forms
of real investment.

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197. Surplus -- A market condition where the quantity supplied of a particular commodity exceeds the
quantity demanded.
198. Tax Burden -- The amount ot tax revenue paid by either buyer or seller when a tax is imposed on a
market.
199. Tax Incidence -- The amount ot tax revenue paid by either buyer or seller when a tax is imposed on
a market.
200. Tax Revenue -- The product of the tax rate and the taxable based -- for example, the per-unit
amount of an excise tax multiplied by the resulting equilibrium quantity traded in the market being
taxed.
201. Technology -- The know-how used to convert factor inputs into desired goods and services (output).
202. Terms of Trade -- An agreement among trading partners defining the quantities of goods to be
exchanged for other goods. Identical to a relative price.
203. Total Costs (TC) -- The sum of fixed (indirect) and variable (direct) costs of production.
204. Total Effect -- The observed change in quantity demanded due to a price change of one particular
good.
205. Total Expenditure -- The amount of spending by households on a good or service -- market price
multiplied by equilibrium quantity (demanded).
206. Total Revenue (TR) -- The amount received by a firm selling goods or services -- market price
multiplied by the equilibrium quantity (supplied).
207. Total Surplus -- The sum of consumer surplus and producer surplus. The difference between the
marginal benefit and marginal opportunity cost of each unit bought and sold in the market place.
208. Total Value (of Consumption) -- The sum of the marginal benefit of each unit of a good purchased
by the consumer. The area below the demand curve up to the quantity purchased.
209. Transitive Preferences -- A logical pattern of preferences where preference of one good over a
second good and preference of the second good over a third good imply preference for the first
good compared to the third good.
210. Unattainable Output Combinations -- Combinations of production that are not possible with
existing technology or resource availability. Combinations of goods that lie beyond the production
possibilities frontier.
211. Unitary Elastic Demand -- A price-quantity demanded combination where the percentage-change in
quantity is equal to percentage change in price.
212. Unrelated Goods -- A pair of goods where the quantity demand of one is unaffected by changes in
the price of the other.
213. Utility -- A measure of the satisfaction received from some type of economic activity (i.e.,
consumption of goods and services or the sale of factor services).
214. Utility Maximization -- The assumed goal of the consumer -- an attempt to acquire a bundle of
goods and services that provide the greatest level of satisfaction.
215. Utility Surface -- A mathematical relationship among different bundles of goods consumed and
their corresponding level of satifaction provided.
216. Variable Costs of Production -- Production costs related to changing quantities of a variable factor
of production in the short run.
217. Variable Factor of Production -- A short run production concept where changes in output are the
result of changes in only one factor of production.
218. Wage Elastic -- Labor supply decisions that are sensitive to changes in the real wage rate.
219. Wage Inelastic -- Labor supply decisions that are insensitive to changes in the real wage rate.
220. Wants -- Preferences for goods and services over and above human needs.

Microeconomic Theory

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