DEFINITIONS

MICROECONOMICS

Economics – The study of how to most effectively allocate scarce resources

Microeconomics – The study of individual economic agents and their decision making

Scarcity – A situation where there are insufficient resources to meet people’s unlimited wants

Sustainability – Using resources so as not to compromise future generations’ standard or quality

of life

Goods – Tangible products that can be touched and measured e.g. cars, food, washing
machines

Services – Intangible products that cannot be touched or measured e.g. banking, insurance,
healthcare

Utility – The total satisfaction received from consuming a good or service

Needs – Goods or services that are required to maintain existence / life e.g. food, water, shelter

Wants – Goods or services that we desire but are not necessary for maintaining existence / life
e.g. cars, watches, TVs

Renewable Resources – Natural resources of economic value that can be replaced or

replenished, or simply aren’t used up e.g. wood, solar energy, wind energy

Non-Renewable Resources – Natural resources of economic value that cannot be readily

replaced by natural means on a level equivalent to their consumption e.g. oil, natural gas, coal

Positive Statements – Statements that do not have to be correct, but must be able to be tested,
and proved or disproved e.g. the UK’s annual GDP growth rate was 2% in January 2016

Normative Statements – Statements that are opinion based and so cannot be proved or
disproved e.g. the government should provide basic education to all citizens

Opportunity Cost – The potential value of the next-best alternative, which is forgone when a
choice is made

Economic Goods – Goods that impose some cost on society when produced. They are scarce /
limited, and so have opportunity cost e.g. TVs, cars, chairs etc…

Free Goods – Goods that impose no cost on society when produced. They are unlimited, and so
have no opportunity cost e.g. air, sunlight etc…

Economic Agents – Decision makers that have effects on the economy of a country by buying,
producing, selling, investing, taxing etc… e.g. households, firms and governments
Household – A group of consumers that buy goods and services. They also supply their labour to
firms to produce goods and services, in order to earn the income needed to purchase goods and
services

Firm – An organisation that uses factors of production alongside each other in order to produce
output. They produce goods and services demanded by consumers

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 DEFINITIONS
MICROECONOMICS
Government – A governing body / organisation that undertakes expenditure (spending) and
impacts the economy via taxation and the regulation of markets

Factors of Production – The available resource inputs used in the production process of goods
and services

Factors of Production (CELL) – Capital + Entrepreneurship + Labour + Land

Capital – Man-made aids for production; goods used to make other goods e.g. MERC –
Machines + Equipment + Robots + Computers

Entrepreneurship – The willingness of an entrepreneur to take risks and organise production

Labour – The human resource that is available in an economy; the quantity and quality of
human resources

Land – The natural resource that is available in an economy; the quantity and quality of natural
resources e.g. oil, coal, rivers, the land itself etc…

Consumer Goods – Goods bought and used by consumers for present use; final goods used for
consumption means rather than production ones e.g. food, TVs, cars, watches etc…

Model – A simplified representation of reality used to create hypotheses (or theories) about
economic decisions and events
Production Possibility Curve (PPC) – A curve showing the maximum quantities of different
combinations of goods and/or services that can be produced in a set time period, given available
resources and the current state of technology

Specialisation – The focusing by a worker or workers, firm, region or whole economy on the
production of a narrow range of products

Division of Labour – A process whereby the production process is broken down into a series of
stages, and workers are designated to particular stages

Productivity – Output of a good or service, per factor of production, per period of time

Money – The circulating medium of exchange as defined by a government

Barter System – A system that relies on the exchange of goods and services for other goods and
services, without the use of money e.g. a potato farmer trading a sack of potatoes for a cut of
beef

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 DEFINITIONS
MICROECONOMICS

Resource Allocation – The way in which a society’s factors of production are used amongst their
alternative uses

Utility Maximisation – The aim of trying to achieve the highest level of satisfaction possible
Profit Maximisation – The aim of trying to achieve the highest level of profit possible
Market Economy – An economy in which the market forces of demand and supply determine
the allocation of resources

Centrally Planned Economy – An economy in which the state determines the allocation of
resources

Mixed Economy – An economy in which both the market forces of demand and supply, and also
the operation of the state, determine the allocation of resources

Capitalism – An economic system characterised by the private ownership of productive

resources, and the ability of individuals to freely pursue their self-interest with minimal
interference from the government

Demand – The quantity of a good or service that consumers are willing and able to purchase at
any possible price in a given time period

Ceteris Paribus – A Latin phrase that means ‘other things being equal’

Law of Demand – A law that states that, ceteris paribus, there is an inverse relationship
between the quantity demanded and price of a good or service

Notional Demand – The desire or want for a product

Effective Demand – The willingness and ability to buy a product

Demand Curve – A graph that shows how much of a product will be demanded at any given
price

Demand Schedule – The collection of data that is used to draw a demand curve for a product

Market – A place in which there are a set of arrangements allowing transactions to take place
between buyers and sellers

Sub-Market – A recognised or distinguishable geographic, economic or specialised subdivision of

a market, also known as a market segment

Composite Demand – Demand for a good that has various uses e.g. water (drinking, washing
etc…)

Diminishing Marginal Utility – A situation whereby an individual gains less additional utility from
consuming a product, the more of it they consume

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 DEFINITIONS
MICROECONOMICS
Veblen / Snob Good – A good for which the quantity demanded increases as the price increases,
because of its exclusive nature and allure as a status symbol e.g. designer, luxury items with a
strong brand identity such as a Rolex watch

Elasticity – A measure of a variable’s sensitivity relative to a change in another variable

Price Elasticity of Demand (PED) – A measure of the responsiveness of quantity demanded

relative to a change in the price of a good or service
% 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑
Price Elasticity of Demand (PED) Formula(s) – OR
% 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝
𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑
×
𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂 𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄𝑄 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝

Price Inelastic Demand – Where the percentage change in the quantity demanded of a product
is insensitive to a change in the price of the product (0 <|PED|< 1) e.g. if the price of Starbucks
coffee increased, there would be a fall in the amount of units (of coffee) they sold, but it
would likely be a very small one due to the brand loyalty and addiction many of us have to
companies like Starbucks and their products

Price Elastic Demand – Where the percentage change in the quantity demanded of a product is
sensitive to a change in the price of the product (|PED| > 1) e.g. if the price of Walkers crisps
increased, you may feel inclined to buy a lot less as there are a lot of other substitutes in the
form of other crisp packet brands and also in the form of other snacks (e.g. peanuts, biscuits)

Price Unitary Elastic Demand – Where the percentage change in the quantity demanded of a
product is equal to a change in the price of the product (|PED|= 1)
𝑁𝑁𝑁𝑁𝑁𝑁 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹−𝑂𝑂𝑂𝑂𝑂𝑂 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹
Percentage Change Formula – × 100
𝑂𝑂𝑂𝑂𝑂𝑂 𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹

Total Revenue (TR) – The total amount of money received for goods sold or services provided
over a certain time period

Total Revenue (TR) Formula – 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 × 𝑄𝑄𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢

Income Elasticity of Demand (YED) – A measure of the responsiveness of quantity demanded

relative to a change in income
% 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑
Income Elasticity of Demand (YED) Formula –
% 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖

Income Inelastic Demand – Goods for which a change in income produces a less than
proportionate change in quantity demanded (|YED|< 1)

Income Elastic Demand – Goods for which a change in income produces a greater than
proportionate change in quantity demanded (|YED| > 1)

Income Unitary Elastic Demand – Goods for which a change in income produces a proportionate
change in quantity demanded (|YED| = 1)

Normal Good – A good where the quantity demanded increases when income rises (YED > 0)

Superior (Luxury) Good – A good where the quantity demanded increases by a proportionately
greater amount than a rise in income (YED > 1) e.g. iPhones (you are likely to buy a lot more if
your income rises)

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 DEFINITIONS
MICROECONOMICS
Necessity Good – A good where the quantity demanded increases by a proportionately smaller
amount than a rise in income (0 < YED < 1) e.g. bread (if your income rose you probably
wouldn’t spend that much more money on bread)

Inferior Good – A good where the quantity demanded decreases when income rises (YED < 0)
e.g. bus travel (if your income rises, you are more likely to spend less on bus travel and just
travel by taxi or a personal car instead)

Giffen Good – A good where the quantity demanded decreases by a proportionately greater
amount than a rise in income (YED < -1) e.g. YED = -2: income rises by 10%  quantity
demanded for good (Giffen good) falling by 20%

Substitutes – Products that can be used for a similar purpose, such that if the price of one
product rises, demand for the other product is likely to rise e.g. PS4 and Xbox One

Complements – Products that tend to be consumed jointly, such that if the price of one product
rises, demand for the other product is likely to fall e.g. PS4 and PS4 video games, or tea and
milk

Competitive Demand – Demand for products that are competing with each other

Joint Demand – Demand for products which are interdependent, such that they are jointly
demanded

Cross Elasticity of Demand (XED) – A measure of the responsiveness of quantity demanded for
one product relative to a change in the price of another product
% 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑 𝑜𝑜𝑜𝑜 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑋𝑋
Cross Elasticity of Demand (XED) Formula –
% 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑜𝑜𝑜𝑜 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑌𝑌

Substitutes (XED Terminology) – Products which have a positive XED value

Complements (XED Terminology) – Products which have a negative XED value

Marginal Social Benefit (MSB) – The additional benefit that society gains from consuming one
more unit of a product

Consumer Surplus – The extra amount of money that a consumer is willing to pay for a product
above the price that they actually pay

Supply – The quantity of a good or service that producers are willing and able to offer at
different market prices over a period of time

Law of Supply – A law that states, ceteris paribus, there is a direct relationship between the
quantity supplied and price of a good or service

Supply Curve – A graph showing how much of a product will be supplied at any given price

Supply Schedule – The collection of data used to draw the supply curve of a product

Competitive Market – A market in which individual firms cannot influence the market price of
the product they are selling, because of the high competition from other firms

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 DEFINITIONS
MICROECONOMICS
Competitive Supply – When a firm can use its factors of production to produce more than one
type of product e.g. a firm can use land to supply food or instead divert its use of land to
producing bio-fuels

Composite Supply (Rival Supply) – When supply of a product comes from more than one
source; a product whose demand can be satisfied through various sources e.g. electricity is a
composite supply as it can be made from gas, nuclear power, wind turbines, hydroelectric
turbines etc… All these sources contribute to make up the supply of electricity, and thus the
demand for electricity can be satisfied through the supply of gas, nuclear power etc... There is
competition between them and so the most economical source is used first (and used the
most), but in the end the rest are combined to co-operate and contribute to the supply of said
product

Joint Supply – When a firm can produce more than one type of product with roughly the same
factors of production e.g. the supply of beef and leather are linked because both of them are
made using cows

Price Elasticity of Supply (PES) – A measure of the responsiveness of quantity supplied relative
to a change in the price of a good or service
% 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑔𝑔𝑔𝑔 𝑖𝑖𝑖𝑖 𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞𝑞 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠
Price Elasticity of Supply (PES) Formula –
% 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑖𝑖𝑖𝑖 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝

Price Inelastic Supply – Where the percentage change in the quantity supplied of a product is
insensitive to a change in the price of the product (0 < PES < 1) e.g. if the price of a commodity,
such as oil, increases, an oil company will be slow to increase supply as it takes a long time to
drill oil out from the ground

Price Elastic Supply – Where the percentage change in the quantity supplied of a product is
sensitive to a change in the price of the product (PES > 1) e.g. if a car factory is operating at 60%
of full capacity, then the car company could easily increase the quantity supplied of cars if
there was an increase in price, and so would likely do so, very quickly, and to a great extent,
relative to the size of the increase in price

Price Unitary Elastic Supply – Where the percentage change in the quantity supplied of a
product is equal to a change in the price of the product (PES = 1)

Marginal Cost (MC) – The cost of producing one more unit of output

Producer Surplus – The difference between the price that a firm is willing to accept for a product
and the price that they actually receive for the product

Free Market Mechanism – The mechanism by which the market forces of demand and supply
determine prices and the economic decisions made by consumers and firms

Price – The sum of money that is paid for a given quantity of a particular product

Price System / Mechanism – The method of allocating resources via the free movement of
prices

Market Equilibrium / Clearing Price – A situation that occurs in a market when the price is such
that the quantity that consumers are willing to buy is equal to the quantity that firms are willing
to supply

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 DEFINITIONS
MICROECONOMICS
Disequilibrium – When internal or external forces prevent market equilibrium from being
reached, such that the market is in a position where demand and supply are not equal

Surplus – An excess of supply (quantity supplied) over demand (quantity demanded)

Shortage – An excess of demand (quantity demanded) over supply (quantity supplied)

Derived Demand – Demand for a factor of production or good which derives not from the factor
or good itself, but from the product(s) it can produce; demand for one item depending on
demand for another e.g. labour is not wanted for its own sake, but for the level of output it
can produce and what that output can be sold for

Unemployment – Occurs when someone of working age is out of work and actively seeking
work

Exchange Rate – The price of one currency in terms of another currency

Interest Rate – The cost of borrowing money, and the amount paid for lending money (or
saving)

Comparative Static Analysis – Examines the effect on equilibrium of a change in the external
factors affecting a market

Production – A process, or sequence of processes, that convert factor inputs into output

Short Run – The time period when at least one factor of production, usually capital, is fixed in
quantity e.g. a firm does not have time to sell off its existing building, end a renting contract,
extend an existing building or acquire a new building in the short run

Long Run – The time period when the quantities of all factors of production are variable

Productive Efficiency – Attained when a firm produces at minimum average total cost (ATC),
choosing a suitable combination of inputs (cost efficiency) and producing the maximum possible
output from those inputs (technical efficiency); where production takes place using the least
amount of scarce resources

Cost Efficiency – The suitable combination of inputs of factors of production, given the relative
prices of said factors

Technical Efficiency – Producing the maximum possible output from a given set of inputs

Allocative Efficiency – When resources are used to produce the goods and services that
consumers want and in such a way that consumer satisfaction (or utility or welfare) is maximised

Economic Efficiency – A situation in which both allocative efficiency and productive efficiency
have been achieved; a situation in which society is producing the mixture of products that
consumers desire at minimum cost

Pareto Optimum – When no reallocation of resources can make one individual better off
without making some other individual worse off

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 DEFINITIONS
MICROECONOMICS

Market Failure – When the free market mechanism does not result in an optimal allocation of
resources, thus causing allocative inefficiency e.g. where there is a divergence between
marginal social benefit (MSB) and marginal social cost (MSC)

Marginal Analysis – A perspective to economic decision making based on examining the

additional (marginal) benefits and costs of a change in activity

Marginal Social Benefit (MSB) – The additional benefit that society gains from consuming one
more unit of a product

Marginal Social Cost (MSC) – The cost to society of producing one more unit of a product

Externality – A cost or benefit that is an external by-product of a market transaction, and is thus
not reflected in the market price

Consumption Externality – An externality that impacts the consumption side of a market, and
may be either positive or negative

Production Externality – An externality that impacts the production side of a market, and may
be either positive or negative

Private Costs – Costs incurred by an economic agent as part of its production or other economic
activities e.g. the costs incurred by a firm to produce a product

External Costs – Costs that are imposed on a third party due to an economic agent’s production
or other economic activities e.g. toxic fumes affecting local citizens, due to production in a
nearby factory

Private Benefits – Benefits experienced by an economic agent as part of its production or other
economic activities e.g. the utility (satisfaction) a consumer gains from consuming a product

External Benefits – Benefits accrued by a third party due to an economic agent’s production or
other economic activities e.g. someone getting a vaccine benefits those around them, as those
around them are now less likely to catch the specific disease from them

Social Costs – Private Costs + External Costs

Social Benefits – Private Benefits + External Benefits

Negative Externality – This occurs when the social cost of an activity is greater than the private
cost i.e. when there is an external cost

Positive Externality – This occurs when the social benefit of an activity is greater than the
private benefit i.e. when there is an external benefit

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 DEFINITIONS
MICROECONOMICS

Private Good – A good that must be purchased to be consumed, and whose consumption by one
person prevents another person from consuming it; such a good has excludability, is rivalrous
(diminishable) and can be rejected e.g. a store owner can exclude you from buying a chocolate
bar by not allowing you to have it if you aren’t willing to pay a certain price for it. It is rivalrous
(diminishable) in the sense that if you consume a chocolate bar, this affects the amount of the
good (chocolate bars) available for others (if there was 10 units in the store, now there is only
9 units available for others, and now nobody else can consume that specific chocolate bar that
you ate). It is rejectable in the sense that you can choose not to consume it

Public Good – A good that one person can consume without reducing its availability to other
people, and from which no one can be excluded; such a good is non-exclusive, non-rivalrous (i.e.
non-diminishable) and non-rejectable e.g. the government cannot exclude you from benefiting
from the ‘consumption’ of national defence. Your consumption of national defence does not
affect the consumption of others (if I build a house next to yours, we both equally benefit
from national defence services). You cannot reject consumption of national defence because,
effectively, just being in the country means you are consuming it

Non-Excludability – A situation existing where individual consumers cannot be excluded from

consumption of a particular product

Non-Rivalrous – A situation existing where consumption by one individual does not affect the
consumption of others

Non-Rejectability – A situation existing where individual consumers cannot reject consumption

of a particular product

Pure Public Good – A good that has all of the characteristics of a public good

Quasi-Public Good – A good that has some, but not all, of the characteristics of a public good

Free Rider – Someone who directly benefits from the consumption of a public good, but who
does not contribute towards its provision; when a person cannot be excluded from consuming a
good, and thus has no incentive to pay for its provision

Merit Good – A good that brings unforeseen benefits to consumers, such that it is likely to be
underconsumed in a free market; a good that has more private benefits than consumers actually
realise e.g. education, health etc…

Demerit Good – A good that brings less benefit to consumers than they realise, such that it is
likely to be overconsumed in a free market; a good whose consumption is more harmful than
the consumer realises e.g. cigarettes, alcohol etc..

Information Failure – A lack of information resulting in economic agents making decisions that
do not maximise welfare

Asymmetric Information – A situation in which some economic agents in a market have better
information about market conditions than others; when information is unequally shared
between two parties

Adverse Selection – A situation in which those who are at higher risk (more likely) of needing
insurance, are more likely to take out insurance

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 DEFINITIONS
MICROECONOMICS
Moral Hazard – A situation in which an individual who has taken out insurance is more likely to
take higher risks; a lack of incentive to guard against risk where one is protected from its
consequences

Internalisation of Externalities – An attempt to deal with an externality by implementing an

external cost or benefit into the price system

Government Failure – A situation where government intervention to correct a market failure

creates inefficiency, does not maximise welfare and leads to a misallocation of scarce resources

Indirect Tax – A tax levied on spending on goods or services

Specific / Per Unit Tax – A tax of a fixed amount for each unit of a good or service sold e.g. £1
per kilogram of a product sold

Ad Valorem Tax – A tax levied on a good or service, set as a percentage of the selling price e.g.
VAT (20% tax rate on products in the UK)

Incidence of a Tax – The way in which the burden of paying a sales tax is shared out between
buyers and sellers

Excess Burden of a Sales Tax – The deadweight loss to society following the introduction of a
sales tax

Subsidy – A sum of money given by the government to producers to encourage production of a

good or service; a payment, usually from a governing body, to encourage production or
consumption

Incidence of a Subsidy – The way in which the benefits of a subsidy are shared out between
buyers and sellers

Excess Burden of a Subsidy – The deadweight loss to society following the granting of a subsidy

Regulation – The imposition of rules by government, backed by the use of penalties that are
intended to change the behaviour of other economic agents to that which is socially optimal

Prohibition – An attempt to prevent the consumption of a demerit good by declaring it illegal

Minimum Wage – A system designed to protect the low paid by setting a minimum wage rate
that employers are obliged to offer to workers

Tradeable Pollution Permits – Permits that allow their owners to pollute up to some given
amount (decided by the government), and, if unused or only partially used, can also be sold to
other polluters

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 DEFINITIONS
MICROECONOMICS

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