10 Key Terms In Microeconomics Every Student Should Know

Are you trying to develop your knowledge of microeconomics?

If yes then you should know some of the key terms that will prove to be helpful to you.

These key terms are important for anyone trying to develop their knowledge of microeconomics whether for the purpose of improving their grades or for general interest.

When you are familiar with the important terms in microeconomics, it will help you gain a better knowledge of the subject.

Read also: 5 Awesome Tips on how to score an A for Economics

Why Learning Key Terms In Microeconomics Is Important?

No matter what the purpose of your learning microeconomics is (such as taking the A-level Economics exam), you cannot do it without learning the key terms first. When you are familiar with the key terms, the subject will make more sense to you.

You will not only start understanding the subject but learning the subject will be more fun for you as well. Apart from this, there are many other important reasons for learning key terms in microeconomics as well.

Let’s take a look at them below.

1. You Will Be Able To Understand Price Determination

The subject of microeconomics helps you in understanding how the prices of different objects are determined. Not only this, but you also get insight into how the prices of various factors of productions are set. When you are familiar with the keywords such as factors of production and price determination, you will be able to understand the subject more in depth. As a result, your knowledge of the subject will improve as well.

2. You Will Know Where To Utilize Resources

Microeconomics teaches us all about the utilization of resources. The subject tries to explain to the readers that the resources out there are limited and scarce. Therefore, they need to be utilized effectively and in an efficient manner. But, you cannot understand how to utilize the resources effectively and efficiently if you do not already have an understanding of the subject. This is why learning the key terms in microeconomics is extremely important.

3. A Better Understanding Of International Trade & Public Finance

The subject of microeconomics helps us to understand many important international trade aspects as well. When you have knowledge of important terms such as effects of the tariff, gains from international trade, determination of exchange rates, you will be able to have a better understanding of international trade and public finance. As a result, your knowledge of the subject will improve.

4. An Understanding Of Model Building

Microeconomics helps us to understand various complex economic situations. The readers can learn different complex economic situations through simple models that the subject has to offer. As a result, the subject has made an extremely valuable contribution to the subject of economics. But, this is not possible without the understanding of the subject and familiarity with the key terms.

5. Helps In Taking Business Decisions

The theories of microeconomics are extremely important and helpful to businessmen for taking important decisions. But, if you do not have an understanding of the key terms, you will not be able to take the crucial business decisions.

10 Key Terms In Microeconomics

If you are trying to get a deeper understanding of the subject of microeconomics, then there are ten key terms that you should be familiar with. These key terms will help you understand the subject better. Let’s take a look at these key terms below.

1. Microeconomics

To learn about the subject itself, you should be first familiar with what the term microeconomics is all about. The term microeconomics refers to the study of individuals, the behavior of households and firms in decision making, and the allocation of various resources. Understanding the term microeconomics itself will help you have a deeper understanding of the subject.

2. Poverty Trap

The next key term that you should know is the word poverty trap. In actuality, the word poverty trap refers to a swirling mechanism that pressurizes people to remain poor. This condition is so binding that it does not allow people to escape from it.

3. Price Ceiling

If you want to have a deeper understanding of the subject of microeconomics, you should also be familiar with the term price ceiling. It is a situation where the price of an object is charged more or less than the equilibrium price. These prices are determined by the market forces of supply and demand.

4. Price Floor

The term price floor is the next important term that you should be familiar with. It is a situation where the price of an object is charged more or less than the equilibrium price. These prices are determined by the market forces of supply and demand.

5. Privatization

The term privatization refers to the transfer of ownership from the government to the private sector. When the government ceases to be the owner of the business or the entity, they transfer its ownership to the private sector. So, if you want to learn about microeconomics, you should also be familiar with the term privatization.

6. Property Tax

The term property tax refers to the amount paid annually by the owner of the land to the municipal corporation of their area or the local government. This property can include all sorts of tangible properties, their office building, house, real estate property, and rented property as well.

7. Public Distribution System

Although the term public distribution system seems simple, the term is much deeper than that. The term refers to a chain of shops sponsored by the government. These government-sponsored shops are given the work of distributing basic food items and other non-food commodities to the people that are needy.

8. Purchasing Power Parity

The next important term that you should be familiar with is the term purchasing power parity. The term purchasing power is actually a theory that determines the adjustments that are made in the exchange rate of the currencies of the two countries. These adjustments are necessary to make the two currencies at par.

9. Regressive Tax

The term regressive tax refers to the tax rate that lowers as the taxable amount increases. Thus, it can be said that there is an inverse relationship between the taxable income and the tax rate. Additionally, the rate of tax also decreases as the income of the person paying the tax increases.

10. Service Tax

For those of you who do not know, service tax refers to a tax imposed by the government on the services they provide. In actual, this service is borne by the customers themselves. This is also an important term that you should be familiar with.

Tips For Learning The Key Terms Quickly

You should always be striving to learn new terms and grow as learning is a part of life. But, learning these key terms requires a bit of efforts. So, if you want to expand your knowledge of microeconomics, there are some proven tips that you should follow. Want to know what those tips are? Keep reading then.

1. Take Notes

Taking notes is one of the most effective ways that will help you to learn the important terms of microeconomics faster. But, make sure that you do it with pen and paper because it helps you learn faster that way. Although you may think that taking notes on your mobile phone or laptop is easier and convenient, it is not effective. So, if you want to learn fast and retain what you have learned in your memory, you should take notes with pen and paper.

2. Use Brain Breaks

If you are someone who tries to cram your head with a lot of information, that you should know that overloading your brain with information is a real thing. Thus, you should not cram your brains with a lot of information all at once. Instead, you should take frequent breaks in between. This will help you in learning important terms in microeconomics faster and more efficiently.

3. Learn In Multiple Ways

Learning through multiple ways does not only make the learning efficient, but you are also able to retain the information for a longer period of time. When you use more than one ways to learn something, your brain will use more regions to store the information about the key terms that you have learned in microeconomics.

4. Speed Reading

Speed reading can actually fasten your learning process. Although you might think speed reading requires a lot of effort, this is not the case. All you need to do is train your brain to process words more quickly. When you will train your brain to process the words, you will be able to get accustomed to reading an entire string of words.

So, if you want to develop your knowledge of economics either for academic purposes or for increasing your knowledge, you should start learning the key terms. When you will be familiar with the key terms, you will have a deeper understanding of the subject. As a result, your knowledge will increase too.

If all else fails, you can engage a qualified Economics teacher to guide you.

More useful reading materials:
Ultimate Guide to Economics Tuition in Singapore
How to study economics effectively