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Economics final exam
Terms in this set (46)
measures the degree to which goods are substitutes or compliments %change in Qdj/% change in Pk
if cross price elasticity is a positive number
if cross price elasticity is a negative number
average total cost
total cost/total output
change in total cost/change in quantity of output
average variable cost curve
the marginal cost curve intersects average variable cost at the minimum point of the _____
average total cost curve
the marginal cost curve intersects the average total cost curve at the minimum point of the _____
short run, inelastic
a period of time short enough that the quantities of one of the resources cannot be varied (____)
long run, elastic
a period of time longg enough that all quantities of the resources can be varied (____)
perfect price descrimination
occurs when a firm charges a different price to different groups of customers for an identical good or service depending on the elasticity of the good/service to each group. allows firm to maximize total revenue and profits
TC-TFC/# of units=AVC
calculating average variable cost when he gives total cost and number of units
consumer equilibrium or equimarginal principle
to maximize utility, consumers must allocate their scarce incomes among goods in such a way as to equate their marginal utility per dollar of expenditure on the last unit of each good purchased. concept in developing demand. consumers to to equilibrium. you will move to the area where MU/P is equal for all goods.
if MUa ____, you will consume more of good a and less of good b
if MU changes, the demand curve ____. helps derive demand for goods.
law of diminishing marginal return
when successive equal amounts of a variable resource are combine with a fixed amount of another resource, marginal increases in the output that can be attributed to each additional unit of the variable resource will eventually decline.
price elasticity of demand
%change in Quantity demand/%change in price
the availability of close substitutes
determinant of price elasticity of demand (1)
whether the good is a necessity or luxury
determinant of price elasticity of demand (2)
how broadly you define the market
determinant of price elasticity of demand (3)
the proportion of a consumer's income it takes to purchase the good
determinant of price elasticity of demand (4)
consumer surplus and producer surplus
the extra that the consumer gets from a market transaction. ex. willing to play $50 for sneakers and only pay $20, that $30 is it.
the extra revenue that producers get. ex. willing to sell for $20, but sell for $50, that $30 is it.
the price one must pay no matter how much they are producing
the extra costs incurred that change depending on how much is produced
good for which the income elasticity of demand is a large positive number. as income rises, people are willing to pay more.
a good that has an income elasticity of demand that is less than 1.
perfectly elastic demand curve
horizontal line. at a price, consumers can and will purchase all they want
perfectly inelastic demand curve
vertical line. no change in quantity demanded as price changes.
straight line demand curve
elastic until the unit elastic point. inelastic after the unit elastic point.
calculated by comparing the same price on 2 demand curves that are different only because income is different. %change in the demand of a good/%change in income.
if income elasticity is a positive number
if income elasticity is a negative number
a measure of who pays a tax. dependent on the price elasticity of demand and supply
consumer pays tax
demand inelastic or supply elastic
producer pays tax
demand elastic or supply inelastic
law of diminishing marginal utility
principle that the more of a good that one obtains in a specific period of time, the less is the additional utility yielded by an additional unit of that good
if elasticity of demand is greater than 1
if elasticity of demand is equal to 1
if elasticity of demand in less than 1
1, unit elastic
when total revenue is maximized, the price elasticity of demand is equal to
minimum point of the ATC curve, profit = 0
minimum point of AVC curve, if you go any lower, you would be losing so much money that it's best not to produce
total physical product
the maximum output that can be produced when successive units of a variable resource are added to fixed amounts of other resources
marginal physical product
the additional output when one additional unit of resource is used in combination with the same quantities of all other resources
if marginal physical product is equal to ____, the total physical product is _____.
THIS SET IS OFTEN IN FOLDERS WITH...
Elasticity: Deman and Supply
Elasticity: Demand and Supply
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