KEYWORDS

BY: NISCHAL GAUTAM

SUBMITTED TO: MRL SIR

Utility: An economic term referring to the total satisfaction received from consuming a good or service. Utility is often modeled to be affected by consumption of various goods and services, possession of wealth and spending of leisure time. Marginal utility:The marginal utility of a good or service is the additional satisfaction (utility) gained or lost from an increase or decrease in the consumption of that good or service. Total utility:The aggregate level of satisfaction or fulfillment that a consumer receives through the consumption of a specific good or service, also total utility is simply the sum of all the marginal utilities of the individual units. Equi-marginal principle:Equi-marginal principle states that if products having same price but different marginal utility is taken then we must expense on the product having high marginal utility. Budget line:A consumer's budget line is the maximum amounts of goods that the consumer can afford. In a two good case, we can think of quantities of good X on the

horizontal axis and quantities of good Y on the vertical axis. The term is often used when there are many goods, and without reference to any actual graph. Substation effect : An effect caused by a rise in price that induces a consumer (whose income has remained the same) to buy more of a relatively lower-priced good and less of a higher-priced one. Substitution effect is always negative for the seller: consumers always switch from spending on higher-priced goods to lower-priced ones as they attempt to maintain their living standard in face of rising prices. Substitution effect is not confined only to consumer goods, but manifests in other areas as well such as demand for labor and capital. Income effect: income effect is the change in an individual's or economy's income and how that change will impact the quantity demanded of a good or service. The relationship between income and the quantity demanded is a positive one, as income increases, so does the quantity of goods and services demanded. Production: The processes and methods employed to transform tangible inputs ,raw materials, semi-

finished goods, or subassemblies and intangible inputs ideas, information, knowledge into goods or services. Production function:The functional relationship that exists between physical inputs and physical output of a firm is called production function.

Total product:Total amount produced by a firm during some time period. Marginal product: the marginal product or marginal physical product of an input (factor of production) is the extra output that can be produced by using one more unit of the input Short run:Period during which only some factors or variables can be changed because there is not enough time to change the others. Long run: In terms of operating activities, a period of time in which all costs are variable, a period of time where investments results are sought for long term gains. Isoquants:A graph of all possible combinations of inputs that result in the production of a given level of output. it Used in the study of microeconomics to measure the

influence of inputs on the level of production or output that can be achieved. Iso cost line: it is a line that shows all combinations of inputs which cost the same total amount. The use of the isocost line pertains to cost-minimization in production, as opposed to utility-maximization. Derived demand:Derived demand is a term in economics, where demand for one good or service occurs as a result of demand for another. Monopoly: it is an enterprise having sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it. Monopoly enterprises can determine their own market price for their product, they can limit the production, and they do not utilize the concept of economic efficiency. Monopolistic competition:Monopolistic competition is a form of imperfect competition where many competing producers sell products that are differentiated from one another the products are substitutes but, because of differences such as branding, not exactly alike

In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit.

Oligopoly:An oligopoly the domination of a market by a few firms. A duopoly is a simple form of oligopoly in which only two firms dominate a market. Where an oligopoly exists, a few large suppliers dominate the market resulting in a high degree of market concentration; a large percentage of the market is taken by the few leading firms. Monopsony: it is a market similar to a monopoly except that a large buyer not seller controls a large proportion of the market and drives the prices down it is sometimes referred to as the buyer's monopoly.

Fixed costs: it is Acostthat does not vary depending onproductionorsaleslevels, such asrent,property tax,insurance, orinterest expense. Variable costs:A cost that changes in proportion to a change in a company's activity or business.For eg. Capital and labor employed. Average cost:The average cost is the total cost divided by the number of units produced. Economies of scale:Economies of scalerefers to the cost advantages that a business obtains due to expansion. Diseconomies of scale:Diseconomies of scale are the forces that cause larger firms and governments to produce goods and services at increased per-unit costs. Diseconomies of scale occur when Average Costs start to rise with increased output. Total revenue:Total revenue is the total receipts of a firm from the sale of any given quantity of output. It can be calculated as the selling price of the firm's product times the quantity sold, i.e. total revenue = price quantity Average revenue:The revenue received for selling a good per unit of output sold, found by dividing total revenue by the quantity of output.

Average revenue is the revenue generated per unit of output sold. It plays a role in the determination of a firm's profit. Per unit profit is averagerevenue minus average (total) cost. Marginal revenue:marginal revenue (MR) is the extra revenue that an additional unit of product will bring. It is the additional income from selling one more unit of a good Diminishing marginal utility: Diminishing marginal utility law says that that he marginal utility of each unit decreases as the supply of units increases. Price discrimination: Price discrimination is a feature of monopoly market whereby monopolist seek to segment market by charging different prices for same product Marginal physical product: it is the extra output that can be produced by using one more unit of the input (for instance, the difference in output when a firm's labor usage is increased from five to six units), assuming that the quantities of no other inputs to production change. Natural monopoly:A monopoly describes a situation where all or most sales in a market are undertaken by a single firm. A natural monopoly is a condition on the costtechnology of an industry whereby it is most efficient

involving the lowest long-run average cost for production to be concentrated in a single form. Average fixed cost:Average fixed cost (AFC) refers to fixed costs of production (FC) divided by the quantity (Q) of output produced.

Average variable cost:Average variable cost (AVC refers to a firm's variable costs for e.g.labor, electricity, etc. divided by the quantity (Q) of output produced. Variable costs are those costs which vary with output of a firm. Where:
  

VC = Variable Cost AVC = Average Variable Cost Q = Quantity of Output Produced

Economic rent:Economic rent is a payment made to factor of production above what is necessary to keep it in its current use. Transfer earning: Amount of money that a factor of production capital, labor, land must earn to prevent being

transferred from its present employment to another. For example, the owner of a machine will rent it out if it fetches more income from renting than from its inhouse usage. Earnings of any factor of production usually equals its economic rent plus its transfer earnings. Cartel:A cartel is a formal explicit agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products. Contestable market:Contestable market is a market structure with few barriers to entry and where there are potential entrants waiting to join if abnormal profits are being earned. Vertical integration:Vertical integration is where a firm combines two or more stages of production normally operated by separate firms. Horizontal integration: Horizontal integration is where two or more enterprises combine activities at same stage or type of production.