Below are some terms that might be useful to know what they mean (up to the end of chapter 5 so far)..... they're in alphabetical order so you can use the alphabar below to choose which letter you want to go to :o)

Artificial barriers to entry - barriers deliberately created by firms in a deliberate attempt to prevent competition

Average revenue - total revenue divided by quantity demanded which is equal to price

Barriers to entry - things stopping other firms joining the market such as economies of scale (supply side) or network externalities (demand side); regulations, skills and resources are also barriers to entry. See also "Artificial barriers to entry"

Business cycle - the periods of boom and recession that succeed each other in market economies.

Ceteris paribus - all other things being equal

Competence destroying innovations - develop new products or changes in existing products which require completely new skills and knowledge to be developed - innovations disrupt industry structure, rendering current capabilities obsolete

Competence enhancing innovations - improvements that develop new products or improvements to existing products, which build on a firms existing competence and strengthen its market position

Concentrated industry - when a few large firms have large market shares

Constant returns to scale - when LRAC remains unchanged as output increases

Contestable market - a market is perfectly contestable if entry and exit are costless

Decreasing returns to scale - when LRAC rises as output increases

Demand curve - typically negative relationship - downward sloping (perfect competition = horizontal)

Diminishing returns - if the use of that factor (all other factors remain fixed) result in less than a proportionate rise in output

Diseconomies of scale - see "Decreasing returns to scale"

Division of labour - degree to which the various tasks involved in the production of a good or service are divided amongst different workers

Dominant strategy - the strategy followed in game theory, regardless of the opponents strategy, resulting in the best possible outcome for the player from the options available.

Duopoly/duopolist - market with two firms

Economies of scale - see "Increasing returns to scale"

Equilibrium - where there is no incentive to change

Factors of production - inputs to the firm's production process such as land, labour and capital

Game theory - a technique used to model strategic choices as a game between players. See also Prisoners' Dilemma

General Purpose Technology (GPT) - technology of sufficiently wide application to be used in various parts of the economy and whose impact is pervasive

Giffen goods - basic goods; demand may fall if price falls as their income is freed up to spend on other goods

Hedonic prices - quality adjusted prices; prices that keep certain quality characteristics constant

Heterogeneity - variety

Increasing returns to scale - when LRAC falls as output increases

Industrial revolution - occurs when rapid and significant technological change fundamentally transforms the way in which a society carries out the production and distribution of goods

Industry life cycle - theoretical framework for identifying general patterns of structural change across different industries; phases of industry life cycle: pre-market or hobbyist, introductory, growth, mature

Industry structure - refers mainly to the way in which power is distributed among firms - can be described by factors such as number of firms in the industry and distribution of market shares

Inferior goods - one for which quantity demanded falls when incomes rise (e.g. basic food, B&W TV sets)

Learning by doing - fall in unit costs as cumulative output increases; said to be "moving along the learning curve" or gaining from "experience effects"

Long-run - all factors of production can be changed

LRAC - long-run average cost

Marginal cost - the change in total cost incurred when the firm produces an extra unit of output

Marginal revenue - change in revenue resulting from the sale of an additional unit of output

Market share - share of total industry production expressed as a percentage

Market system - firms are free to decide what to produce and how to produce it, households free to decide which to buy of the consumption goods available - plans of firms and households are co-ordinated through the adjustment of prices which takes place when buyers and sellers come together in competitive markets

Minimum efficient scale - output at which long-run average costs first reach their minimum level as output rises; where no further reductions in average costs can be obtained

Monopolistic competition - uses the model of "pure monopoly" but drops the assumption that new firms cannot enter the market

Monopoly power / market power - firm has this if it has some choice in setting the price of its product and its decision about how much to supply influences the price it can charge - firms particularly likely to exercise such monopoly power if they are large relative to the size of the market as a whole

Network externalities - arise when the value to one consumer of joining a network depends on the number of other consumers joining the network (demand side)

Normal goods - one for which quantity demanded increases when incomes rise

Oligopoly/oligopolist - a market supplied by only a few firms

Opportunity cost - the opportunity cost of using a resource is the amount it would have earned in its best alternative use

Pay-off - a players gain or loss from a strategy chosen in game theory - it can be anything that is of value to the player but in economic games it will be an economic variable such as profit, revenue, or sales.

Perfectly competitive market - where all firms and consumers are "price takers"; based on the assumptions that information is freely available, products are homogeneous, freedom of entry/exit to the market

Players - Players in game theory are the decision makers (be they firms, individuals, governments etc).

Price competition - when firms gain customers by selling goods more cheaply than their competitors

Price elasticity of demand - measures the responsiveness of the quantity demanded of a product to changes in its price

Price elasticity of supply - measure of the responsiveness of supply to changes in price

Price takers - do not have the ability to influence the market price; output in any firm is insignificant compared to the whole market

Prisoners' Dilemma - a game showing pay-offs in the form of a matrix. Firms have a dominant strategy that they follow regardless of the other's firms strategy.

Product differentiation - e.g. branding - characteristic of markets where products are broadly similar

Productivity - indicator of the efficiency of production or distribution

Profit maximising output - where MR = MC (perfect competition MR=P)

Pure monopoly - Most extreme industrial concentration occurs when single firm supplies the whole market

Short-run - unable to change at least one factor of production

SRAC - short-run average cost; dividing total cost in short run by number of units produced for each level of output

SRAVC - Short-run average variable cost; variable cost per unit at each level of output

SRMC - Short-run marginal cost - always crosses AC at lowest point

Strategic competition - firms need to take account of expected reactions of their rivals when making their plans and coming to decisions

Supernormal profits - any profit in excess of normal profit; amount by which AR exceeds AC

Supply curve - any point on the MC curve above the AC curve (LR or SR); indicates how much firm will supply at each market price

Technological competition - competition through innovation - firms introduce new products and improve old ones

Veblen goods - luxury goods that may be in greater demand at higher prices