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41 Cards in this Set

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Total Profits =
total revenue - total costs
Total Revenue =
price per unit x # of units sold
If Profits go up
more resources are attracted to industry
Q goes up
If Profits go down
resources leave industry
Q goes down
Voluntary Exchange =
mutual gains for both parties
percentage change
change in x / base x
Elasticity =
% change in response variable/ % change in what caused the response
Elastic
Greater than one
inelastic
less than one
unit elastic
= 1
price elasticity of demand =
% change in Q / % change in Price
percentage change
change in x / base x
Elasticity =
% change in response variable/ % change in what caused the response
Elastic
Greater than one
inelastic
less than one
unit elastic
= 1
arc price elasticity
(Q1 - Q2) (P1 - P2)
-------- / ---------
(Q1 + Q2) (P1 + P2)
if Price goes up than
Total Revenue goes up
elasticity is always
Positive
Income elasticity of demand
>0 - normal good

<0 - inferior good
Cross price elasticity
>0 - substitutes
<0 - compliments
=0 - unrelated
Marginal Utility =
change in total utility
-----------------------
change in quantity
as Marginal Utility goes down
diminishing marginal utility
Plot Marginal Utility
at midpoints on graph
Positive Economic Profits
Incentive for more resources to enter market
Zero Economic Profits
No incentive for resources to leave or enter
Negative Economic Profits
incentive for more resources to leave
Short Run
one input held constant
Long Run
all inputs free to vary
Fixed Inputs
cannot be changed in a short period of time
Variable Inputs
inputs can be changed relatively quickly
ex: unskilled labor
Production Function
relationships between inputs and outputs
Average Product =
Quantity / Labor
Total Fixed Costs are
CONSTANT - fixed costs do not vary
TVC
Price x Quantity
MC =
P Labor
---------------
MP Labor
MP Labor=
Change in Q
-----------
change in L
AP Labor =
Q / L
AVC =
TVC /Q
ATC=
TC / Q
Averag Revenue =
Product Price