Build chains of reasoning: point → because → which means → leading to → therefore. For evaluation, use MICE: Magnitude, It depends, Counter-argument, Economic con…
Key terms glossary
Spec: A–Z
| Term | Definition |
|---|---|
| Allocative efficiency | Resources reflect consumer preferences; occurs where P = MC. |
| Average revenue (AR) | TR ÷ Q = price. The AR curve is the demand curve. |
| Barrier to entry | Anything that makes it hard for new firms to enter a market. |
| Cartel | A group of firms colluding to fix price or output. |
| Concentration ratio | The combined market share of the largest n firms. |
| Contestable market | A market with low entry/exit barriers, where the threat of entry disciplines firms. |
| Diseconomies of scale | Rising long-run average cost as a firm grows too large. |
| Dynamic efficiency | Efficiency over time through innovation and investment. |
| Economies of scale | Falling long-run average cost as output rises. |
| Game theory | The study of interdependent decision-making between firms. |
| Kinked demand curve | A model explaining price stability in oligopoly via a gap in MR. |
| Limit pricing | Setting a price low enough to deter new entrants. |
| Marginal cost (MC) | The cost of producing one more unit. |
| Marginal revenue (MR) | The change in total revenue from selling one more unit. |
| Minimum efficient scale (MES) | The lowest output at which LRAC is minimised. |
| Monopolistic competition | Many firms, low barriers, differentiated products; LR normal profit. |
| Monopoly | A single dominant seller protected by high barriers; a price maker. |
| Monopsony | A single or dominant buyer in a market. |
| MRP | Marginal revenue product — the basis of the demand for labour. |
| Normal profit | The minimum return to keep a firm in the industry (AR = AC); a cost. |
| Oligopoly | A few large interdependent firms dominating a market. |
| Perfect competition | Many firms, identical products, free entry; price takers. |
| Predatory pricing | Pricing below cost to drive rivals out of a market. |
| Price discrimination | Charging different prices to different groups for the same product. |
| Principal–agent problem | Managers (agents) pursuing aims that differ from owners' (principals'). |
| Productive efficiency | Producing at minimum average cost (MC = AC). |
| Supernormal profit | Profit above normal (AR > AC). |
| Sunk costs | Costs that cannot be recovered on exit; they reduce contestability. |
| Vertical integration | Merging with a firm at a different stage of the supply chain. |
| X-inefficiency | Failing to minimise costs through lack of competitive pressure. |
Command words — what each one wants
Spec: Marks
| Command word | What it expects |
|---|---|
| Define / State | A precise meaning — no development needed. |
| Calculate | Work out a figure; show your method and units. |
| Explain | Give reasons — a short chain of cause and effect. |
| Analyse | Build a developed chain of reasoning, usually with a diagram. |
| Discuss / Assess / Evaluate / Examine | Analyse and weigh both sides to reach a justified judgement (AO4). |
Build chains of reasoning: point → because → which means → leading to → therefore. For evaluation, use MICE: Magnitude, It depends, Counter-argument, Economic context (market structure, contestability, short vs long run).
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