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42 Cards in this Set

  • Front
  • Back
fixed input
one whose qty cannot be randomly changeed during the relevant period of production
variable input
one whose qty can be randomly changed during the relevant period of production
plant size fixed
plant size variable
production schedule
shows output that can be produced using hte fixed and variable inputs

use to derive measures of productivity
two measures of productivity
1. average product of labor

2. marginal proudct of labor
average product of labor
firm's output Q divided by the corresponding level of the variable input L

marginal product of albor
change in the firms' output as a result of the firm using one more unit of labor

basically: change in Q over change in L
law of diminishing returns
as amt of labor used is increased, eventually a point will be reached where using more labor yields diminishign marginal contributions to the total output

what determines...
what goods should be produced?
price of goods
what determines...
how should goods be produced?
price of resource
what determines...
who receives the goods?
characteristics of market economy
1. all scarce resources owned by private individuals
2. freedom of enterprise
3. freedom of choice
4. principle of self-interst
5. price system
karl marx's view on market econmy
1. ignores fundamental conflict b/w labor and capitalists
2. fails to recognize importance of monopoly firms
3. overlooks importance of unemployment
productin possibilities curve
shows all combinations of two goods a society could produce with full and efficient employment of its resources
assumptions about PPC
1. economy is operating at full employment and production
2. avail amt of economy resources is fixed
3. technology is constant
cost of goods
how many units of good Y a society must give up to produce one more unit of good X
law of increasing cost
as the amt of good X produced is increased, the amt of good Y that must be given up will continually increase
market demand
schedule that shows at each price of the product how many units all the consumers in the market would be willing to purchase during a specified time period
fundamental law of demand
more of a good will always be purchased at a lower price than at a higher price
non-price determinants of demand
1. income
2. price of related goods
3. tastes or preferences
4. number of buyers in market
5. consumer expectations about future prices
6. advertising
change in demand
change in non-price determinant of demand

causes SHIFT in demand curve
change in quantity demanded
only if price of product changes

causes MOVEMENT ALONG demand curve
schedule which shows at each price the product P how amny units of the product all the sellers in the market are willing to sell during a specified time period
non-price determinants of supply
1. number of sellers
2. technology
3. price of resources
4. price of other goods suppliers can produce
5. seller expectations about future prices
change in supply
change in non-price determinant of supply

causes a SHIFT in supply curve
change in quantity supplied
price of product changes

causes MOVEMENT ALONG same supply curve
price ceiling
price mandated by govt below the market price
price support
price mandated by govt above the market price
price elasticity of demand
number which measures responsiveness the purchases of a good resulting from a change in its price
good X tends to be relatively more elastic...
1. larger the number of substitues for good X
2. closer the substitutes
3. greater the portin of a consumer's income needed to purchase good X
4. longer the time period a consumer has to produce good X
good X tends to be relatively more inelastic...
1. smaller the number of subs
2. very few close subs
3. smaller the protion fo a consumer's income needed to purchase good X
4. shorter the time period a consumer has to purchase good X
who pays the tax ths more inelastic the supply?
who pays the tax the more inelastic the demand?
fixed costs
those which remain the same regardless of the level of output
varaible costs
costs which incrase w/ level of firm's output
short run costs
fixed costs
variable cost
marginal cost
change in the firm's total cost as a result of firms producing one more unit of output
long run average cost curve
shows plant size that has lowest per-unit cost of producing a given level of output
economies of scale
cost-saving due to size
diseconomies of scale
cost increasing due to size
optimal plant size
plant size that has the lowest per unit cost of producing only level of output