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33 Cards in this Set
- Front
- Back
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elasticity
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a measure of how much one economic variable responds to changes in another economic variable
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price elasticity of demand
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the responsiveness of the quantity demanded to a change in price
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perfectly inelastic demand
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change in price results in no change in quantity demanded
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perfectly elastic demand
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change in price results in infinite change in quantity demanded
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determinants of price elasticity of demand
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-availability of close substitutes
-passage of time -luxuries vs. necessities -definition of market |
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total revenue
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total amount of funds received by a seller of a good or service
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cross price elasticity of demand
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percent change in quantity demanded of one good divided by percent change in price of another
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income elasticity of demand
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responsiveness of quantity demanded due to changes in income
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price elasticity of supply
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responsiveness of quantity supplied to change in price
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production function
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relationship between the inputs employed by the firm and the maxium output it can produce with those inputs
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marginal product of labor
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additional output a firm produced as a result of hiring one more worker
change in Q/ change in L |
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law of diminishing returns
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the principle that, at some point, adding more of a variable input to the same amount of a fixed input will cause the marginal produce of the variable input to decline
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average product of labor
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total output produced by a firm divided by the quantity of workers
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Marginal cost
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change in a firms total cost from producing one more unit of a good or service
change in TC/ change in Q |
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long run average cost curve
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shows the lowest cost at which the firm is able to produce a give quantity of output in the long run, when no inputs are fixed
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economies of scale
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exists when a firm's long run average costs fall as it increases output
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constant returns to scale
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exist when a firm's long run average costs remain unchanged as it increases output
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minimum efficient scale
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level of output at which all economies of scale have been exhausted
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diseconomies of scale
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exist when a firm's long run average costs rise as it increases output
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expansion path
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curve showing a firm's cost-minimizing combination of inputs for every level of output
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perfectly competitive markets
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1.many buyers and sellers
2. identical products 3. no barriers for new firms to enter |
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price taker
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a buyer or seller that is unable to affect the market price
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profit
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TR-TC
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marginal revenue
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change in TR/ change in Q
P=MR=AR |
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Maximize profits
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P=MC
MR=MC |
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profit
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(P-ATC) x Q
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sunk costs
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costs that have already been paid and cannot be recovered (FC)
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economic profit
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Revenue - (implicit + explicit costs)
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economic loss
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firm's revenue less then TC, including implicit and explicit
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long-run competitive equilibrium
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entry and exit of firms result in typical firm breaking even
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long-run supply curve
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relationship between market price and quantity supplied
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monopolistic competition
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1. low entry barriers
2. many firms 3. selling similar products (NOT IDENTICAL) |
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oligopoly
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small number of interdependent firms compete
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