Economics+-+definitions

Consumer tastes exhibit a **diminishing marginal rate of substitution** when, to hold utility constant, diminishing quantities of one good must be sacrificed to obtain successive equal increases in the quantity of the other good.
 * Economics** analyses what, how, and for whom society produces.
 * A scarce resource** is one for which the demand at a zero price would exceed the available supply
 * Transfer payments** are payments made to individuals without requiring the provision of any service in return.
 * Law of diminishing returns** - each additional worker adds less to total industry than the previous one
 * Trade-off** - by transferring workers from one industry to the other, the economy can produce more of one good, but only at the expense of producing less of the other good
 * Production possibility frontier** shows the maximum combinations of output that the economy can produce using all available resources, it presents a trade-off
 * A market** is a shorthand expression for the process by which households´ decisions about consumption of alternative goods, firms´ decisions about what and how to produce, and workers´decisions about how much and for whom to work are all reconciled by adjustment of prices.
 * A market** is a set of arrangements by which buyers and sellers are in contact to exchange goods or services.
 * Positive economics** deals with objective or scientific explanations of the working of the economy. It studies how the economy actually behaves.
 * Normative economics** offers prescriptions or recommendations based on personal value judgements. It makes prescriptions about what should be done.
 * Microeconomic analysis** offers a detailed treatment of individual decisions about particular commodities
 * Macroeconomics** emphasizes the interactions in the economy as a whole. It deliberately simplifies the individual building blocks of the analysis in order to retain a manageable analysis of the complete interaction of the economy.
 * A model** or theory makes a series of simplifying assumptions from which it deduces how people will behave. It is a deliberate simplification of reality.
 * An index number** expresses data relative to a given base value.
 * The retail price index** is used to measure changes in the cost of living, the money that must be spent to purchase the typical bundle of goods consumed by a representative household.
 * Real earnings** are calculated by adjusting nominal earnings for changes in the cost of living.
 * Demand** is the quantity of a good buyers wish to purchase at each conceivable price
 * Supply** is the quantity of a good sellers wish to sell at each conceivable price
 * The demand curve** shows the negative relation between price and quantity demanded, holding other things equal.
 * The supply surve** shows the relation between price and quantity supplied, holding other things constant.
 * Market equilibrium** is where the curves DD and SS intersect.
 * A normal good** is a good for which demand increases when incomes rice.
 * An inferior good** is a good for which demand falls when incomes rise.
 * The price elasticity of demand (supply)** is the percentage change in the quantity of a godd demanded (supplied) by the corresponding percentage change in its price.
 * The budget constraint** describes the different bundles that the consumer can afford. The slope of the budget line depends only on the ration of the prices of the two goods.
 * The marginal rate of** substitution of meals for films is the quantity of films the consumer must sacrifice to increase the quantity of meals by one unit without changing total utility.
 * An indiferent curve** shows all the consumption bundles which yield the same utility to the consumer.
 * A firm****’****s revenue** is the amount it earns by selling goods or services in a given period such as a y