| A | B |
|---|
| Price Elasticity of Demand | Measures how sensitive consumers are to change in the price of a product |
| Price ceiling | Maximum legal price a seller may chage for a product/service. |
| Price floor | Minimum prices fixed by government. |
| Elastic demand | A percentage change in prices results in a larger percentage change in quantity demanded. |
| Inelastic demand | A specific percentage change in price is followed by a smaller percentage change in quantity demanded. |
| Unit elasticity | A percentage change in price is accompanied by same percentage change in quantity demanded. |
| Opportunity cost | Value of resource is measured by its best alternative use. |
| Fixed costs | Costs which in total do not vary with changes in output. |
| Variable costs | Costs that change with the level of output. |
| Total costs | Sum of fixed costs and variable costs. |
| Economies of scale | Increasing plant size (fixed costs) will lead to lower average costs of production, for a time. |
| Short run | Time frame in which firms unable to alter plant capacity. |
| Long run | Time frame in which all resources employed can be adjusted. |
| Explicit costs | Money payments a firm makes to outside suppliers of resources. |
| Implicit costs | Opportunity costs associated with firm's use of resources it owns. |
| Normal profit | Implicit cost of entrepreneurship. |
| Economic profit | Total revenue less all explicit and implicit costs, including normal profit. |
| Sunk costs | Costs incurred and cannot be partly or fully recouped by some other choice so are ignored. |
| Marginal cost | Additional cost of producing one more unit of output. |
| Utility | Amount of satisfaction or pleasure a person derives from consuming some specific quantity of a good/service. |
