Absolute advantage- the ability of an individual, a firm, or a country to produce more of a good or a service then competitors, using the

same amount of resources. Allocative efficiency- a state of economy in which production is in accordance with consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it. Autonomy- independence or freedom, as of the will or one's actions: the autonomy of the individual. The condition of being autonomous; self-government, or the right of selfgovernment; independence: The rebels demanded autonomy from Spain. A self-governing community. Business cycle- A period during which business activity reaches a low point, recovers, expands, reaches a high point, decreases to a new low point, and so on. A recurrent fluctuation in the total business activity of a country. Centrally planned economies- an economy in which the government decides how economic resources will be allocated. Circular flow model- a model that illustrates how participants in markets are linked. Comparative advantage- the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost then competitors. Consumer surplus- the difference between the highest prices a consumer is willing to pay for a good or service and the price a consumer actually pays. Definition of Microeconomics- the study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices. Dumping- selling a product for a price below its cost of production. Economic effiency- A market outcome in which the marginal benefit to the consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum. Economic equity- The situation in an economy in which the apportionment of resources or goods among the people is considered fair. Endowment effect- the tendency of people to be unwilling to sell a good they already own even if they are offered a price that is greater than the price would be willing to pay to buy the good if they didnt already own it. Entrepreneurship- The capacity and willingness to undertake conception, organization, and management of a productive venture with all attendant risks, while seeking profit as a reward. In economics, entrepreneurship is regarded as a factor of production together with land, labor, natural resources, and capital. Entrepreneurial spirit is characterized by innovation and risktaking, and an essential component of a nation's ability to succeed in an ever changing and more competitive global marketplace. Exports- goods and services produced domestically and sold in other countries. Factors of production- labor, capital, natural resources, and other inputs used to produce goods and services. Foreign consumption- the action of using up a resource: Example: industrialized countries should reduce their energy consumption.

Foreign direct investment- the purchase or building by a domestic firm of a facility in a foreign country. Free trade- trade between countries that is without government restrictions. Human capital- the accumulated training and skills the workers posses. Imports- goods and services bought domestically but produced in other countries. Income effect- the change in the quantity demanded of a goods price on consumers purchasing power. Income elasticity- a measure of the responsiveness of quantity demanded to changes in income, Marginal benefit- the additional benefit to a consumer from consuming one more unit of a good or service. Marginal cost- the additional cost to a firm of producing one more unit of a good or service. Marginal utility- the change in total utility a person receives from consuming one additional unit of a good or service. Market economics- economy regulated by market forces: an economy in which prices and wages are determined mainly by supply and demand, rather than being regulated by a government. Opportunity cost- the highest valued alternative that must be given up to engage in an activity. Physical capital- the tangible resources used to produce goods and services. Price ceiling- a legally determined maximum price that sellers may charge. Price elasticity of demand- the responsiveness of the quantity demanded to a change in price, measured by dividing the percentage change in the quantity demanded of a product by the percentage change in the products price. Price floor- a legally determined minimum price that sellers may receive. Protectionism- the use of trade barriers to shield domestic firms from foreign competition. Quota- a numerical limit imposed by a government on the quantity of a good that can be imported into the country. Rent control- Regulations by state or local governments restricting the amount of rent landlords can charge tenants; designed to keep the cost of housing affordable for residents. Scarcity- a situation in which unlimited wants exceed the limited resources available to fulfill those wants. Self-Actualization- the achievement of one's full potential through creativity, independence, spontaneity, and a grasp of the real world. Subsidy- a direct pecuniary aid furnished by a government to a private industrial undertaking, a charity organization, or the like. A sum paid, often in accordance with a treaty,

by one government to another to secure some service in return. A grant or contribution of money. Money formerly granted by the English Parliament to the crown for special needs. Substitution effect- the change in quantity demanded of a good that results from a change in price, marketing the good more or less expensive relative to other goods that are substitutes. Sunk costs- a cost that has already been paid and cannot be recovered. Tariff- a tax imposed by a government on imports. Theory of comparative advantage- Concept in economics that a country should specialize in producing and exporting only those goods and services which it can produce more efficiently (at lower opportunity cost) than other goods and services (which it should import). Comparative advantage results from different endowments of the factors of production (capital, land, labor) entrepreneurial skill, power resources, technology, etc. It therefore follows that free trade is beneficial to all countries, because each can gain if it specializes according to its David Ricardo (1772-1823) on comparative cost. Total revenue equation- Total sales revenue and other revenue for a particular period. Total utility- The overall amount of satisfaction achieved by a consumer due to the purchase and use of a particular item or service. Consumers theoretically wish to obtain the maximum degree of total utility for the amount of money that they expend on an item or service offered by a business. Transfer payments- Money given by the government to its citizens. Examples include Social Security, unemployment compensation, welfare, and disability payments. Utility- the enjoyment or satisfaction people receive from consuming goods or services. Average total cost total cost divided by the quanity of output produced. Business structures - A business (also known as acompany, enterprise, and firm') is a legally recognized organization designed to provide goods or services, or both, to consumers, businesses and governmental entities. Businesses are predominant in capitalist economies. Most businesses are privately owned. .The way in which a business is organized. Economic long run -The time period over which the value of a given set of economic inputs is recovered, which is often a function of both the physical life of the asset and its economic usefulness. Economic short run -Any period less than the economic long run. During the economic short run, economists argue that price levels should cover all variable costs and make some or no contribution to fixed costs, but that full costs may not be recovered. Equity the fair distribution of economic benefits. Common and preferred stocks, which represent a share in the ownership of a company. Explicit costs Acost that involes spending money. An explicit cost is an easily accounted cost, such as wage, rent and materials. It can be transacted in the form of money payment and is lost directly, as opposed to monetary implicit costs. Factor market -In economics a '"Factor market'" refers to markets where the factors of production are bought and sold such as the labor markets, the capital market, the market for raw materials, and the market for management or entrepreneurial resources.The market for a factor of production, such as labor or capital, in which supply and demand interact to determine the equilibrium price of the factor

Franchise - The decision to market your business, services or goods for a fee or a per-cent of the gross sales. Restaurants can draw up a franchise agreement allowing others to use their name, advertising, expertise and concept for a fee. Implicit costs - In economics, an implicit cost, also called an imputed cost, implied cost, or notional cost, is the opportunity cost that results from using an asset instead of renting, selling, or lending it. The term also applies to forgone income from choosing not to work. Income elasticity of demand - This measures the responsiveness of demand to a given change in income. It is an important piece of information to a firm as it helps them to predict how much the demand for their product will grow as the economy grows. Minimum wage law - Minimum wage law is the body of law which prohibits employers from hiring employees or workers for less than a given hourly, daily or monthly minimum wage. More than 90% of all countries have some kind of minimum wage legislation. Monopolistic competition - Monopolistic competition is a form of imperfect competition where many competing producers sell products that are differentiated from one another (that is, the products are substitutes, but, with differences such as branding, are not exactly alike. Monopoly - An economic advantage held by one or more persons or companies deriving from the exclusive power to carry on a particular business or trade or to manufacture and sell a particular item, thereby suppressing competition and allowing such persons or companies to raise the price of a product . Oligopoly - a market in which control over the supply of a commodity is in the hands of a small number of producers and each one can influence prices and affect competitors. Optimal marginalism - refers to the use of marginal concepts in economic theory. Marginalism is associated with arguments concerning changes in the quantity used of a good or service, as opposed to some notion of the over-all significance of that class of good or service, or of some total quantity there of. Patent - A grant made by a government that confers upon the creator of an invention the sole right to make, use, and sell that invention for a set period of time. Perfectly competitive market - In economic theory, perfect competition describes markets such that no participants are large enough to have the market power to set the price of a homogeneous product. Because the conditions for perfect competition are strict, there are few if any perfectly competitive markets. Price elasticity of demand - is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price. More precisely, it gives the percentage change in quantity demanded in response to a one percent change in price (holding constant all the other determinants of demand, such as income). Price maker - An individual or company which is influential enough to affect the price of an item. Someone who holds a large majority of a stock. Price Taker - An individual or company which is not influential enough to affect the price of an item. Productive effiiciency - (also known as `technical efficiency`) occurs when the economy is utilizing all of its
resources efficiently, producing most output from least input. Purchasing power - Purchasing power is the number of goods/services that can be purchased with

a unit of currency. Short-run fixed costs - In production, fixed costs are the costs that do not vary with the number of goods produced. In the short-run factors like land and rent are fixed costs, whereas raw materials used in production are not. Sunk costs - Sunk costs are unrecoverable past expenditures. These should not normally be taken into account when determining whether to continue a project or abandon it, because they cannot be recovered either way. It is a common instinct to count them, however. Trademark - any name, symbol, figure, letter, word, or mark adopted and used by a manufacturer or merchant in order to designate his or her goods and to distinguish them. Wage rate - Rate of pay based on per unit of production or per period of worktime on the job.