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41 Cards in this Set
- Front
- Back
- 3rd side (hint)
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budget set |
the set of all possible bundles of goods and services that can be purchased iwth a consumers income |
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Consumer surplus |
the difference between the willingness to pay and the price paid for the good |
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Elasticity |
the measure of sensitivety of one variable to change in another |
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arc elasticity |
the method od calculating elasticities that measures at the mid point of the demand range |
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Elastic Demand |
goods that have a price elasticity greater than 1 |
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Perfectly elastic demand |
A very small increase in price causes consumers to stop using goods |
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Unit Elastic Demand |
goods that have a price elasticity equal to one |
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inelastic demand |
goods that have elasticity of demand less than one |
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Perfectly Inelastic Demand |
Quantity demanded is uneffected by price |
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Cross price elasticity of demand |
measures the percentage change in quantity demanded of a good due to a percentage change in another goods price |
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income elasticity of demand |
measures the percentage changei nquantity demanded due to a percentage change in income |
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Normal good |
When income rises and consumers buy more of a good |
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Inferior Good |
When income rises and consumers buy less of a good |
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Physical Capital |
is any good including machines and buildings uded for production |
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short run |
a period of time when only some of a firms inputs can be varied |
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long run |
period of time when all of a firms inputs can be varried |
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fixed factor of production |
an input that cannot be changed in the short run |
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variable factor of production |
an input that can bechanged in the short run |
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Marginal Product |
the change in total output associated with using one more unit of input |
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Specialization |
the result of workers developing a certain skill set in order to increase totoal productivity |
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Law of Diminishing returns |
states taht succesive increases in inputs eventaully lead to less additional output |
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Total Cost |
the sum of variable and fixed costs |
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Variable cost |
the cost of varibale factors of production which change alongwith a firms output |
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fixed cost |
the cost of fixed facotrs of production which a firm must pay even if it produces zero output |
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Average total cost |
the total cost divided by the total output |
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marginal cost |
the change in total cost with producing one more unit of output |
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Revenue |
the amount of money the firm brings in form that sale of its outputs |
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Marginal Revenue |
the change in total revenue associated with producing one more unit of output |
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Profits |
a firm are equal to its revenues minus its costs |
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Accounting profits |
are equal to total revenue minus explicit costs |
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Economic profits |
are equal to total revenue minus both explicit and implicit costs |
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Price elasticity of supply |
the measure of how responsice quantity supplied is to price changes |
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shutdown |
short run decision to not produce anything during a specific period |
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sunk costs |
costs that once committed can never be recovered and should not affect current and future production decisions |
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Producer surplus |
the difference between the market price and marginal cost curve |
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Economies of Scale |
occur when ATC falls as the quantity produced increases |
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Constant returns to scale |
exist when ATC does not change as the quantity produced changes |
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Disecononmies of scale |
occur when ATC rises as the quantity produced incrases |
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free entry |
entry into an industry when entry is unfettered by any special legal or technical barriers |
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Free exit |
from an industry when exit is unfettered by any special legal or technical barriers |
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