ExternalityIn economics, an externality or external cost is an indirect cost or benefit to an uninvolved third party that arises as an effect of another party's (or parties') activity. Externalities can be considered as unpriced goods involved in either consumer or producer market transactions. Air pollution from motor vehicles is one example. The cost of air pollution to society is not paid by either the producers or users of motorized transport to the rest of society. Water pollution from mills and factories is another example.
Productive efficiencyIn microeconomic theory, productive efficiency (or production efficiency) is a situation in which the economy or an economic system (e.g., bank, hospital, industry, country) operating within the constraints of current industrial technology cannot increase production of one good without sacrificing production of another good. In simple terms, the concept is illustrated on a production possibility frontier (PPF), where all points on the curve are points of productive efficiency.
Supply (economics)In economics, supply is the amount of a resource that firms, producers, labourers, providers of financial assets, or other economic agents are willing and able to provide to the marketplace or to an individual. Supply can be in produced goods, labour time, raw materials, or any other scarce or valuable object. Supply is often plotted graphically as a supply curve, with the price per unit on the vertical axis and quantity supplied as a function of price on the horizontal axis.
EconomicsEconomics (ˌɛkəˈnɒmᵻks,_ˌiːkə-) is a social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyzes what's viewed as basic elements in the economy, including individual agents and markets, their interactions, and the outcomes of interactions. Individual agents may include, for example, households, firms, buyers, and sellers.
Surplus productSurplus product (Mehrprodukt) is a concept theorised by Karl Marx in his critique of political economy. Roughly speaking, it is the extra goods produced above the amount needed for a community of workers to survive at its current standard of living. Marx first began to work out his idea of surplus product in his 1844 notes on James Mill's Elements of political economy. Notions of "surplus produce" have been used in economic thought and commerce for a long time (notably by the Physiocrats), but in Das Kapital, Theories of Surplus Value and the Grundrisse Marx gave the concept a central place in his interpretation of economic history.
Regulatory economicsRegulatory economics is the application of law by government or regulatory agencies for various economics-related purposes, including remedying market failure, protecting the environment and economic management. Regulation is generally defined as legislation imposed by a government on individuals and private sector firms in order to regulate and modify economic behaviors. Conflict can occur between public services and commercial procedures (e.g.
Welfare economicsWelfare economics is a field of economics that applies microeconomic techniques to evaluate the overall well-being (welfare) of a society. This evaluation is typically done at the economy-wide level, and attempts to assess the distribution of resources and opportunities among members of society. The principles of welfare economics are often used to inform public economics, which focuses on the ways in which government intervention can improve social welfare.
Supply shockA supply shock is an event that suddenly increases or decreases the supply of a commodity or service, or of commodities and services in general. This sudden change affects the equilibrium price of the good or service or the economy's general price level. In the short run, an economy-wide negative supply shock will shift the aggregate supply curve leftward, decreasing the output and increasing the price level. For example, the imposition of an embargo on trade in oil would cause an adverse supply shock, since oil is a key factor of production for a wide variety of goods.
Laffer curveIn economics, the Laffer curve illustrates a theoretical relationship between rates of taxation and the resulting levels of the government's tax revenue. The Laffer curve assumes that no tax revenue is raised at the extreme tax rates of 0% and 100%, meaning that there is a tax rate between 0% and 100% that maximizes government tax revenue. The shape of the curve is a function of taxable income elasticity—i.e., taxable income changes in response to changes in the rate of taxation.
Marginal utilityIn economics, utility refers to the satisfaction or benefit that consumers derive from consuming a product or service. Marginal utility, on the other hand, describes the change in pleasure or satisfaction resulting from an increase or decrease in consumption of one unit of a good or service. Marginal utility can be positive, negative, or zero. For example, when eating pizza, the second piece brings more satisfaction than the first, indicating positive marginal utility.
Production (economics)Production is the process of combining various inputs, both material (such as metal, wood, glass, or plastics) and immaterial (such as plans, or knowledge) in order to create output. Ideally this output will be a good or service which has value and contributes to the utility of individuals. The area of economics that focuses on production is called production theory, and it is closely related to the consumption (or consumer) theory of economics. The production process and output directly result from productively utilising the original inputs (or factors of production).
Aggregate supplyIn economics, aggregate supply (AS) or domestic final supply (DFS) is the total supply of goods and services that firms in a national economy plan on selling during a specific time period. It is the total amount of goods and services that firms are willing and able to sell at a given price level in an economy. There are two main reasons why the amount of aggregate output supplied might rise as price level P rises, i.e., why the AS curve is upward sloping: The short-run AS curve is drawn given some nominal variables such as the nominal wage rate, which is assumed fixed in the short run.
