CHAPTER 1: INTRODUCTION TO APPLIED ECONOMICS
Compiled by S. Paderna
CHAPTER 2: THE MARKET: DEMAND, SUPPLY, AND EQUILIBRIUM
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CHAPTER 3: PRICE DETERMINATION
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CHAPTER 4: MARKET STRUCTURE
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ADDITIONAL TERMINOLOGIES
Bilateral monopoly - is a market situation comprising of one seller (i.e., monopoly) and only one buyer (i.e.,
monopsony).
Bilateral oligopoly - is a market condition with a significant degree of seller concentration (i.e., oligopoly) and a
significant degree of buyer concentration (i.e., oligopsony).
Black markets - as the situation worsens, producers will take advantage of the consumers by selling their
products at higher prices in illegal markets
Capital goods - refers to the goods that are used to produce other goods and cannot be directly consumed
Cartel - this is one form of a formal agreement in an oligopoly
Ceteris paribus – is a device used by holding the other variable constant
Consumer goods - refers to the goods that are available for direct consumption
Consumer surplus - refers to the monetary gain enjoyed when a purchaser buys a product for less than what
they normally would be willing to pay
Consumer’s surplus - is an indicator of social welfare that can help a society make rational social decisions
Deadweight loss - represents the costs that society bears due to market inefficiency
Demand for a product is said to inelastic if consumers will pay almost any price for the product
Duopoly - is a subset of an oligopoly where a market situation has only two suppliers
Duopsony - is a market situation in which there are only two buyers but many sellers
Economics - is the study of how individuals and societies choose to use the scarce resources that nature and
previous generations have provided
Effectiveness - It refers to the attainment of goals and objectives
Efficiency – it refers to the productive and proper allocation of economic resources
Efficient market - it is a market in which profit opportunities are eliminated almost instantaneously.
Entering the Market - the firm will have to think if such business will be profitable and he/she will formulate
strategies on how to exploit that margin to earn.
Exit - is a long-term decision of a firm to leave the market.
Fixed cost - is still paid whether or not the firm decides to shut down or not. It does not change with the level of
goods produced.
Floor price - is a form of assistance extended by the government for the producers to survive in their business.
Floor prices - are mainly imposed by the government on agricultural products – especially when there is a
bumper harvest.
Inelastic demand happens when the demand curve becomes steeper
Inelastic occurs when goods and services for which there is no close substitutes
Law of supply – it states that, ceteris paribus, the seller will sell more at a higher price
Macroeconomics - discusses the measurement of gross national products and gross domestic products
Macroeconomics - focuses on the four sectors of the economy: aggregate households, business, government,
and externals
Macroeconomics – this is when the government is predicting the future levels of inflation and employment rate
is under what scope of economics?
Marginal cost – is the price of a product unit along the supply curve
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Market failures - occur when goods and services in a market become inefficient or no longer bring in economic
efficiency.
Market structure - pertains to the nature and different degrees of competition prevailing in the market for goods
and services
Microeconomics - is the branch of economics that deals with the individual decisions of the units of the
economy: firms and households
Microeconomics - is the study of how consumers and producers interact in individual markets is
Microeconomics - operates at the level of the individual business firm, as well as that of the individual
consumer
Monopolistic competition - products in this market are differentiated
Monopolistic Competition Market - is characterized by a big number of buyer and sellers but unlike a perfect
competition, a product offered in this market is slightly different from the other.
Monopoly - this market is identified with its lack of substitutes because of having a singular seller in the market.
It is the extreme opposite of perfect competition.
Monopsony - is a form of buyer concentration, that is, a market situation in which a single buyer confronts
many small suppliers.
Normal goods - it refers to the goods whose demand rises as income increases.
Normative economics - it deals with ethics, personal value judgments, and obligations analyzing economic
phenomena
Oligopoly - is a market structure which is characterized by a few interdependent sellers.
Oligopoly – this market can sometimes experience firms taking part in anticompetitive behavior
Opportunity cost - it arises mainly because resources are scarce or limited
Perfectly Competitive Market or Competitive Market - a market with many buyers and sellers trading similar
products such that each buyer and seller takes the market price as given
Price ceiling - refers to the price that creates shortage
Price control - is the government's specification of minimum or maximum prices for certain goods and services,
when the government considers existing prices disadvantageous to the producer or consumer
Price flooring - it refers to the price that always generate a surplus
Price volatility – an economic problem which occurs when consumer are alarmed because of the sudden price
increase of household commodities.
Producer surplus - is the price difference between what producers are willing to accept for their produce and
what they actually receive for a good or service
Scarcity is a situation in which available resources cannot satisfy all potential uses for the resources
Shutdown - is a short-term decision of a firm to halt production for a specific period of time due to market
conditions.
Variable cost - this determines a company to shut down. It is the expense that varies with the level of output
produced.
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