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28 Cards in this Set
- Front
- Back
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Tradeoff
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Exchange for another good
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Opportunity cost
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Best thing you must give up to get something else
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PPF
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Shows limits to production with available resources
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Slope of PPF
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Gets steeper when opportunity cost increases
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Demand
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Price up = demand down
Price down = demand up |
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TUV
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Max amount of goods one is willing to pay for
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AUV
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TUV/Q
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MUV
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Max Amount willing to pay for an extra unit
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Diminishing marginal use value
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The larger the TUV the lower the Marginal Value
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Compliment
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Goods consumed together
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Demand curve movement
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P up D down - movement up curve
P down D up - movement down curve D up - shift curve right D down - shift curve left |
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Law of supply
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P up Supply up
P down Supply down |
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Market supply
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Sum of all sellers in market
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Individual demand
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Demand of one person or group
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Market equilibrium
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QD = QS
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Normal good
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Demand up if Income is up
Demand down if Income is down |
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Inferior good
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Demand down if income goes up
Demand up if income decrease |
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% change in price
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(New price - Initial price)
___________________________ x 100 Initial price |
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Elastic
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% quantity is greater than % price
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Inelastic
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% Quantity is less than % Price
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% change in QD
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Q2-Q1
---------- (Q1+Q2)/2 |
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Revenue rule
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If revenue decreases demand is elastic
If revenue increases demand is inelastic |
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Price elasticity of demand
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% CQD / % CP
Greater than 1 elastic Less than 1 inelastic |
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Price elasticity of supply
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% CQS / %CP
If greater than 1 elastic If less than 1 inelastic |
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Cross elasticity of demand
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Response to change in price in compliment or substitute
% CQD ------------ % P in C or S |
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Compliments in elasticity
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Compliments change in opposite directions and are negative
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Substitutes in elasticity
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Change in same direction and positive
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Straight line demand curve
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Midpoint is unit elastic
Top point is elastic Bottom is inelastic |
