# Econ Notes 11/2/10

## 45 terms

Pre

### Linear function

y = a + bx (b= slope, a = y when x = 0)

### Slope

b or ^Y/^X or rise over run

### Ch1

Manager, Profits, and Markets

### Economic Profit

TR - TEC or TR - EC - IC

TR - EC

### Ch3

Marginal Analysis

TB - TC

A*

### Choice Variables

determine value of the objective function, either continuous (continuum of values) or discrete (span of values interrupted by gaps)

### Marginal Benefit (MB)

^TB / ^A and slope of TB curve

### Marginal Cost (MC)

^TC / ^A and slope of TC curve

MB = MC

### Sunk Costs

previously been paid, non-recoverable

### Fixed Costs

constant, no matter the activity level

### Average Costs

TC / # units of activity (A)

### Maximize NB?

ignore all 3, don't affect MC of A

### "Bang per Buck"

MB / P, how to allocate fixed \$ among activities

### Ch 2

Demand, Supply, Market Equilibrium

### General Demand Function

Qd = f(P, M, Pr, T, Pe, N)... 6 variables influence...

### Law of Demand (P)rice

slope is negative or inverse

### Normal or inferior good (M) income

slope is positive/direct or negative/inverse

### Compliments or substitutes (Pr) price of related good

slope is inverse/negative or positive/direct

### (T) tastes

slope is positive/direct

### (Pe) expected price

slope is positive, demand in current period goes up

### (N) # consumers

slope is positive, demand goes up

Qd = f(P)

### P is plotted

on vert. axis and is indi.

### Qd is plotted

on hor. axis and is depen.

### Demand price

1) max amount of good purchased at price 2) max price consumers pay for certain amount of good

change in price

### "Change in Demand"

demand curve shifts right or left due to changes in determinants of demand

### Determinants of Demand

(M, Pr, T, Pe, N)

### General Supply Function

Qs = g(P, Pl, Pr, T, Pe, F)

### (P) price

direct, positive slope

### (Pl) inputs

inverse, slope is negative

### Substitutes or Complements (Pr) related goods

inverse/negative or direct/positive

### (T) technology

direct, positive slope

### (Pe) expected price

inverse, negative slope

### (F) # comp. firms

direct, slope is positive

Qs = f(P)

### Supply Price

max good at given price or min price for given amount of good

### "Supply change"

when 5 determinants of supply change

### Change in quantity supplied

price change, curve shifts right or left

### Equilibrium Price & Quantity

where demand and supply curves meet