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29 Cards in this Set
- Front
- Back
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Economics |
The study of how limitedresources are used to satisfy society’s unlimited wants |
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Scarcity of resources |
-Our desires are always greater than our capacityto meet those desiresImplications of scarcity -We must make choices about what we produce and consume |
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Efficiency |
Allocating available resources in the best way possible to meet as many of the needs and wants of its people as possible |
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Opportunity cost |
The cost of the resources that are devoted to the production of one good/service, therefore cannot be used in another |
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Production possibility curve |
-Demonstrates opportunity cost -Shows all combinations of 2 goods that can be produced assuming fixed resources that are efficiently employed |
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Calculating price elasticity of demand |
%change in Qd / %change in P |
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Five possible values for price elasticity of demand |
-Perfectly inelastic -Inelastic -Unit elastic -Elastic -Perfectly elastic |
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Perfectly inelastic |
- 0 elasticity -No matter how high price goes, people buy same amount -Vertical curve |
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Inelastic |
-0 - 1 elasticity -Large price increase would only lead to small decreases in quantity demanded -Demand curve is steep |
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Unit elastic |
- 1 elasticity - Change in quantity demanded is exactly proportionate to price change |
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Elastic |
- 1 - infinity elasticity -Small price change results in large change in quantity demanded -Expensive goods with substitutes |
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Perfectly elastic |
- Infinite elasticity -Horizontal curve |
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Factors affecting price elasticity of demand |
-Availability of substitutes -Time period (Short v. long run) -Nature of goods -Fraction of income |
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Calculating price elasticity of supply |
%change in Qs / %change in P |
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Factors affecting price elasticity of supply |
-Accessibility of resources -Time period |
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Calculating profits |
TR - TC |
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Calculating total revenue |
P * Q |
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Accounting profits |
TR - TC (only monetary costs) |
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Economic profits |
TR - TC (both monetary and opportunity costs) |
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Normal profit |
Economic profit is zero |
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Variable costs change when... |
output is increased aka labor costs |
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Law of specialization |
When laborers specialized in a task, productivity increases because of skillz |
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Law of diminishing returns |
As you increase the amount of one input, the amount of output will decline |
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Marginal costs |
The additional cost from selling one more unit of a product |
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Marginal revenue |
additional revenue received for selling an additional unit of output |
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Profit maximization |
produce as long as marginal revenue is greater than or equal to marginal costs |
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Competitive markets are efficient because.. |
They create the greatest possible happiness given society's scarce resources |
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Types of markets |
Monopoly Oligopoly Monopolistic competition Perfect competition |
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