A market is in equilibrium if at the market price the quantity demanded is equal to the quantity supplied. The price at which the quantity demanded is equal to the quantity supplied is called the equilibrium price or market clearing price and the corresponding quantity is the equilibrium quantity.

Nash equilibrium is an important equilibrium or solution concept in non-cooperative game theory. A Nash equilibrium is a strategy profile (i.e. a strategy for each player) in which each player is playing a best response to the strategy of the other(s). More simply, a Nash equilibrium describes a situation in which each person acts optimally given the actions of the others, so that no one wants to change his or her action.

Marginal revenue (MR) measures the change in total revenue that occurs when a firm increases output by one unit, i.e., it is the extra income (or revenue) generated by selling one additional unit.

Trade barriers refer to the obstacles that are put in place by governments to limit free trade between national economies. Trade barriers are thus essentially interventions in markets that happen to operate internationally. Trade barriers include tariffs (taxes) on imports (and occasionally exports) and non-tariff barriers to trade such as import quotas, subsidies to domestic industry, embargoes on trade with particular countries (usually for geopolitical reasons), and licenses to import goods into the economy.

When the price ratio between items changes this can induce a change in consumption. The part of such a change in consumption that is attributable purely to the change in the price ratio (and not to the associated change in purchasing power) is known as the substitution effect. The remaining part of the change in consumption that is not directly due to the change in the price ratio but is rather brought about by the change in purchasing power is known as the income effect.

Where there is scarcity, choices must be made! Scarcity refers to the finite nature and availability of resources while choice refers to people’s decisions about sharing and using those resources. The problem of scarcity and choice lies at the very heart of economics, which is the study of how individuals and society choose to allocate scarce resources.

The price elasticity of supply for an item A ηA measures how the quantity of the item supplied qA changes in response to a change in the item’s price pA

An oligopoly is a market in which there are only a few sellers of the item being traded. The decisions of one seller thus affect the decisions of the other sellers in the market.  Sellers compete strategically in the market by taking each other’s interests and actions into account.

In a labour market, employees sell their labour (the item in the market) to employers for a wage (the price at which labour is exchanged in the market). Insofar as labour is a factor of production, a labour market is classified as a factor market. As with the market for any normal good or service, demand for labour tends to increase as the wage (price of labour) falls, while the supply of labour tends to increase as the wage rises and it becomes more attractive for people to work.

The price elasticity of demand for an item A ϵA measures how the quantity of the item demanded qA changes in response to a change in the item’s price pA

Factor markets (or resource markets) are markets for the inputs to production. A producer is typically a seller in the market for a product (supply SG in the graph below) while simultaneously being a buyer in the markets for its factors of production (demand DF below).

Income elasticity of demand  YEDA  is a measure of how the quantity demanded of an item A  qA  in a market is affected by a change in income  Y  on the demand side of the market:

Economies of scale are the savings that occur when an entity grows in size and can produce output more efficiently or at lower cost. Here, the word “entity” can refer to individuals, organisations or even entire nations.

A demand curve shows the relationship between an item’s price and the quantity of the item demanded, either by an individual or by all participants in the market. Demand curves are downward-sloping for most items as greater quantities are demanded at lower prices.

The law of diminishing marginal returns states that as the input of a factor of production increases ceteris paribus, the additional output from the last unit of input decreases.

A deadweight loss is the irrecoverable reduction in economic efficiency that occurs when a free-market equilibrium is disturbed by a market intervention or other shock to supply and/or demand. In economic theory, free markets are beneficial to society because they allow consumers and producers to exchange goods and services for money and both sides of the market gain at the equilibrium price in terms of consumer surplus and producer surplus. In a simple economy with just one

One of the most fundamental tenets of economics. Supply refers to the quantity of a product being produced, and demand the quantity consumers wish to buy. In its most basic form, it refers to the theory that the price for a good or service will eventually settle at a point when its demand and its quantity are equal (assuming all other factors remain equal). This is referred to as the equilibrium.

In its simplest form, opportunity cost refers to the loss of the positive results of a decision when an alternative decision is made. It refers to the actual loss incurred by not choosing one option when another is selected. This cost does not only refer to money, but any lost benefits which may result in choice. A simple example of this would be that the opportunity cost of using a machine to make one product is the production of another product. That is, the second product cannot be produced, and its not being produced is an opportunity cost.

The cross elasticity of demand (or cross-price elasticity of demand)  ϵAB refers to the sensitivity of the demand for item A  qA  to changes in the price of item B&n

In capital markets, capital is exchanged between investors (who supply it from their assets) and investees (who need it to fund projects and ventures).  The investment horizon is usually at least one year.

A problem of adverse selection occurs in the case of asymmetric information  whenever a better informed market player uses information to take advantage of another player in the market who does not hold that information.  In turn, this adversely affects participation in the market.

An antitrust policy is a law or other government regulation that limits the dominance of large firms and promotes competition in the market.

If market players have different levels of information about each other’s valuations of the market then the information is asymmetric, or asymmetrically distributed. In classical economic theory, information is assumed to be complete and evenly distributed among market players: each player knows how the other players value the items being traded in the market. This simplifies the analysis of the market because the players’ actions will be certain and predictable. Market outcomes (prices and quantities) can then be easily calculated.

When economists say “ceteris paribus” they are talking about the direct effect of X on Y while assuming that the rest of the world stands still. Ceteris is Latin for “other things” and paribus means “equal” so the literal translation is “other things being equal” but in economics it is generally understood to mean that all other things remain equal or constant (while dealing with the issue at hand).

Consumer surplus is the gain made by consumers when they purchase an item at the competitive market price rather than the (highest) price that they would have been willing to pay for it.  Analogously, producer surplus is the gain made by producers when they sell an item at the market price rather than the (lowest) price that they would also have accepted for it.