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Microeconomics Chapters 20 and 21
main vocab and things to study
Terms in this set (32)
Law of diminishing marginal utility
As the consumption of a product increases, the marginal utility derived from consuming more of it will eventually decline.
The additional satisfaction derived from consuming an additional unit of good.
The maximum price a consumer will be willing to pay for one more. This falls as consumption increases.
The extra amount of a good consumed because it is cheaper in relation to the alternatives.
The extra amount of a good consumed because of the consumer's expanded real income.
Price Elasticity of Demand
How responsive consumers are to a change in price.
What effects elasticity of demand?
The quality of substitutes available. If people have good substitutes, they'll just switch.
How responsive consumers are with a change in income.
A good where more of it is bought as the income raises.
A good where less of it is bought as income falls.
Price Elasticity of Supply
Same as price elasticity of demand.
People who benefit form the excess of revenues over costs
Working less than expected to make work easier.
When a buyer doesn't know the full extent of the trouble of a seller goes through to provide a service.
A business owned by a single person.
When two people own a business.
A firm owned by shareholders who gain and are liable based on their investment in the firm.
Payments by a firm to purchase the services of a productive resource
Opportunity costs associated with a firm's use of resources that it owns. (Does not count $)
The costs, both explicit and implicit of all the resources used by the firm.
Opportunity cost of equity capital
The rate of return investors must get in order to supply financial capital to the firm.
Short Run in production
A time period so short that a firm is unable to vary some of its factors of production.
Long run in production
A time period long enough to allow the firm to vary all of its factors of production.
Total fixed costs
The sum of the costs that do not vary with output.
Average fixed costs
Declines as output increases.
The change in total cost required to produce and additional unit of output.
Law of Diminishing Returns
Things are less valuable the more they are done or consumed.
A marginal increase in the total product resulting from an increase in the employment of a variable input.
Economies of Scale
Big plants can make things easily.
Constant returns to sale
Units of costs that are constant as the scale of the firm is altered.
Costs that have already been incurred as a result of past decisions.
Recommended textbook explanations
Principles of Microeconomics
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EconPortal for Essentials of Economics (access card)
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Connect Plus Economics One Semester Online Access for Principles of Macroeconomics
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Bundle: Principles of Economics, 6th + Aplia 2-Semester Printed Access Card
N. Gregory Mankiw
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