Key words of Section 1: Microeconomics
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| Market | A process or an institution through which potential buyers and sellers of a product interact
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| Demand | The relationship between various possible prices and the corresponding quantities that an individual or the market is willing and able to buy per period of time
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| Normal Goods | Goods for which demand increases following an increase in consumers' income
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| Inferior Goods | Goods for which demand decreases following an increase in consumers' income
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| Substitute Goods | Two goods that can satisfy the same need for a consumer which are thus in competitive consumption and for which XED is positive.
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| Complementary Goods | Goods that are consumed jointly
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| Consumer Surplus | The difference between how much a consumer is willing and able to pay at the most for some amount of a good and what he or she actually ends up paying
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| Producer Surplus | The difference between what a firm earns and the minimum it requires to offer a given amount of a good
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| Allocative Efficiency | Exists when "just the right amount" from society's point of view has been produced. MSB = MSC
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| Price Elasticity of Demand (PED) | The responsiveness of demand to a change in price
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| Price Elasticity of Supply (PES) | The responsiveness of supply to a change in price
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| Cross-price Elasticity of Demand | The responsiveness of the demand for a good to a change in the price of another good
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| Income Elasticity of Demand (YED) | The responsiveness of demand to a change in income
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| Indirect Taxation | A tax on goods or on expenditure on a "per unit" basis or as a percentage of the price
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| Specific Tax | An indirect tax that is set as a fixed amount per unit
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| Ad Valorem Tax | An indirect tax expressed as a percentage of the price of a product
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| Subsidy | A payment made by the government to firms aiming at lowering costs and price and thus raising production and consumption of the product as well as firms' revenues
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| Price Ceiling | A maximum price set by the government which is below the free market price
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| Price Floor | A minimum price set by the government which is above the free market price
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| Market failure | When market forces alone fail to allocate scarce resources efficiently, over or under production or consumption of a good.
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| Externalities | When an economic activity creates benefits or imposes costs for third parties for which these do not pay or get compensated for
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