Microeconomics Vocabulary

Microeconomics Vocabulary

|Word |Definition |
|Market |A market is any situation or place that enables the buying and selling of goods and|
| |services |
|Perfect Competition |Perfect competition is a market structure made up of a large number of small firms,|
| |each selling homogeneous (identical) products to a large number of buyers. Perfect |
| |competition also requires freedom of entry and exit for firms and perfect knowledge|
| |among the firms. Perfect competition should lead to the optimum allocation of |
| |resources. |
|Monopoly |A monopoly is a firm that dominates the market and in the case of a pure monopoly |
| |has a 100% market share (produces the entire output of the industry). A monopolist |
| |will have a high degree of market power and therefore the ability to 'set' prices |
|Oligopoly |Oligopoly is a market structure where a market has just a few firms. Each of the |
| |firms will account for a large proportion of output. In an oligopolistic market |
| |there will tend to be a high degree of interdependence between the firms as they |
| |will watch carefully what the other firms are doing. |
|Duopoly