Blossary – Microeconomics

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This glossary encompasses the most frequently used terms within microeconomics, giving brief descriptions and practical uses.

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Created by: Timmwilson

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normal good

A good for which an increase in income directly relates to an increase in demand for that good.

comparative advantage

Ability of one person or nation to produce a good at a lower opportunity cost than another person or nation. It is not possible to have a comparative advantage in both products.

absolute advantage

Ability of one person or nation to produce a product at a lower resource cost than another person or nation. It is possible to have an absolute advantage in multiple goods when comparing to other ...

real value

The purchasing power of money. Real Value = Nominal Value + Adjustment for Inflation. Real value is more important for determining true growth, as it is adjusted for inflation.

nominal value

The 'face value' amount of money, aka the stated value. Nominal values are not adjusted for inflation.

factor of production

There are 5 major factors of production within microeconomics: Natural resources, Labor, Physical capital, Human capital, Entrepreneurship. These factors are important when determining production ...