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Terms in this set (90)
Rewards and penalties that motivate behavior
Value of the opportunities lost
Increase in the general level of prices
Ability to produce the same good using fewer inputs than another producer
Production Possibilities Frontier (PPF)
Shows all the combinations of goods that a country can produce given its productivity and supply of inputs
Ability to produce a good with the lowest opportunity cost
Function that shows the quantity demanded at different prices
Quantity that buyers are willing and able to buy at a particular price
The consumer's gain from exchange, or the difference between the maximum price a consumer is willing to pay for a certain quantity and the market price
Total consumer surplus
Measured by the area beneath the demand curve and above the price
Important Demand Shifters
Price of Substitues
Price of complements
A good for which demand increases when income increases
A good for which demand decreases when income increases
a function that shows the quantity supplied at different prices
The amount of a good that sellers are willing and able to sell at a particular price
Important Supply Shifters
Changes in price of inputs
Taxes and Subsidies
Entry or exit of producers
Changes in opportunity costs
A situation which the quantity supplied is greater than the quantity demanded.
Situation in which the quantity demanded is greater than the quantity supplied
The price at which the quantity demanded is equal to the quantity supplied
The quantity at which the quantity demanded is equal to the quantity supplied
Increase/Decrease in Quantity Demanded
A movement along a fixed demand curve caused by a shift in supply curve
Increase in Quantity Supplied
Movement along a fixed supply curve caused by a shift in demand curve
Elasticity of Demand Definition & Equation
measures how responsive the quantity demanded is to a change in price; more responsive means more elastic.
Ed = (% ΔQdemanded) ÷ (% ΔPrice)
l Ed l >1= Elastic
l Ed l < 1= Inelastic
l Ed l = 1 = Unit Elastic
Elasticity and Revenue
l Ed l >1= Elastic (Revenue and price move in opposite directions)
l Ed l < 1= Inelastic (Revenue and Price move together)
l Ed l = 1 = Unit Elastic (Revenue stays the same when price changes)
Elasticity of Supply Definition and Equation
measures how responsive the quantity supplied is to a change in price.
Ed = (% ΔQSupplied) ÷ (% ΔPrice)
A BINDING price ceiling is a maximum price allowed by law
Total of lost consumer and producer surplus when not all mutually profitable gains from trade are exploited. These bitches are caused by price ceilings.
Price ceiling on rental housing
Minimum price allowed by law
cost paid by the consumer or the producer
Cost to everyone: the private cost plus the external cost
External costs or external benefits that fall on bystanders
consumer surplus plus producer surplus plus everyone else's surplus
The price and quantity that maximizes social surplus
The quantity that maximizes social surplus
Tax on a good with external costs
Benefit received by people other than the consumers or producers trading in the market
Subsidy on a good with external benefits
All the costs necessary to reach an agreement
If transaction costs are low and property rights are clearly defined, private bargains will ensure that the market equilibrium is efficient even when there are externalities.
Change in total revenue from selling an addition unit.
MR=Price in a competitive industry
change in total cost from producing an additional unit
Also known as normal profits, occur when P=Ac. At this price the firm is covering all of its costs, including enough to pay labor and captial their ordinary opportunity costs
Increasing cost industry
an industry in which industry costs increase with greater output; show with an upward sloped supply curve
Constant cost industry
an industry in which industry costs do not change with greater output; show with a flat supply curve
Decrease cost industry
an industry in which industry costs decrease with an increase in output; show with a downward sloped supply curve
the power to raise price above marginal cost without fear that other firms will enter the market
A firm with market power
Economies of scale
Advantages of large scale production that reduce average cost as quantity increases
Exists when a single firm can supply the entire market at a lower cost than two or more firms.
Barriers to entry
Factors that increase the cost to new firms of entering an industry
A good is nonexcludable if bitches who don't pay can get their asses blocked from using dis good
A good is nonrival if one person's use of the good doesn't impede on someone else's ability to use the same good. IDEAS ARE NON RIVAL TOO.
Excludable and rival
Nonexcludable and Nonrival
Nonrival Private Goods
Goods that are excludable but non rival (DUH)
Enjoys the benefits of a public good without paying a share of the costs
someone who pays a share of the costs of a public good BUT DOESN'T WANT TO
Goods that are nonexcludable but rival
Tragedy of the Commons
Tendency of any resource that is unowned and hence nonexcludable to be overused and undermaintained
Gross Domestic Product
the dollar value of all final goods and services produced within a country's borders in a given year.
GDP per Capita
GDP divided by population
Gross National Product
Market value of all final goods and services produced by a country's permanent residents, wherever located, in a given year.
Have not be adjusted for changes in prices
LIKE GDP, have been adjusted for changes in prices by using the same set of prices in all time periods
Significant widespread decline in real income and employment.
Growth rate of real GDP per capita.
(Y2-Y1/Y1) x 100
Rule of 70:
70/x is the equation for annual growth rate.
Stock of tool including machines, structures, and equipment.
Productive knowledge and skills that workers acquire through education, training, and experience.
The rules of the game
Capital stock is neither increasing nor decreasing
the tendency (among countries with similar steady-state levels of output) for poorer countries to grow faster than richer countries
Marginal product of capital
Increase in output caused by the addition of one more unit of capital. Marginal product of capital diminishes as more and more capital is added.
income that is not spent on consumption goods
Purchase of new capital goods
Desire to have goods sooner rather than later. Greedy bitches.
Banks, bond markets, stock markets reduce the costs of moving savings from savers to borrowers and investors.
One hell of a sophisticated IOU
Something of value that by agreement becomes the property of the lender if the borrower defaults
decrease in private consumption and investment that occurs when government borrows more
Initial Public Offering (IPO)
When a corporation pops their stock virginity by offering their shares for sale for the first timeeee.
E=V-D Asset minus Debt
Ratio of debt to equity D/E ABCDE D COMES FIRST
Liabilities that exceed its asset
Workers who are adults who do not have a job but who are looking for work
All workers, emplyed plus unemployed
the percentage of the labor force that is unemployed
Recommended textbook explanations
Principles of Economics
N. Gregory Mankiw
Principles of Microeconomics
N. Gregory Mankiw
N. Gregory Mankiw
Campbell R. McConnell, Sean M. Flynn, Stanley L. Brue
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