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33 Cards in this Set
- Front
- Back
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If PEoD > 1 then Demand is
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Price Elastic Demand is sensitive to price changes
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If PEoD = 1 then Demand is
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Unit Elastic
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If PEoD < 1 then Demand is
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Price Inelastic Demand is not sensitive to price changes
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Negative Sign Elasticity
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ignore the negative sign when analyzing price elasticity, so PEoD is always positive
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Arc Price Elasticity
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change Q (P1 + P2)
__________________ change P (Q1 + Q2) |
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Income Elasticity of Demand less than zero
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A negative income elasticity of demand is associated with inferior goods; an increase in income will lead to a fall in the demand and may lead to changes to more luxurious substitutes (inferior good)
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cross elasticity of demand
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measures the responsiveness of the demand for a good to a change in the price of another good. It is measured as the percentage change in demand for the first good that occurs in response to a percentage change in price of the second good.
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income elasticity of demand
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measures the responsiveness of the demand for a good to a change in the income of the people demanding the good, ceteris paribus. It is calculated as the ratio of the percentage change in demand to the percentage change in income
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Inferior Good
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A negative income elasticity of demand is associated with, an increase in income will lead to a fall in the demand and may lead to changes to more luxurious substitutes (IEOD)
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Normal Good
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A positive income elasticity of demand is associated with,an increase in income will lead to a rise in demand (IEOD)
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K
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FC
___ R |
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MPL
Marginal product of labor |
change Q
_________ change L |
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FC
fixed costs |
r * K
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VC
variable costs |
w * L
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Short-Run
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At least one input fixed (usually capital)
No entry or exit possible Production choice: shutdown (Q = 0) or produce (Q > 0) |
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TC
Total Cost |
FC + VC
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MC
Marginal Cost |
dTC
____ dQ (previous TC minus current TC) |
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AC
Actual Cost |
TC
___ Q |
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AVC
Actual Variable Cost |
VC
___ Q |
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AFC
Actual Fixed Cost |
FC
___ Q |
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L
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VC
___ W |
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PFF Step:1
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calculate the endpoints
Maximum X Maximum Y |
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PFF Step:2
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calculate the opportunity costs
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PFF Step: 3
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next rank the opportunity cost from lowest amount to highest
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L
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VC
___ W |
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What are the six supply determinants?
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Price of Inputs, Price of Resource Change, Changes in Technology, Change in Expected Price, Number of Firms, and Price of Related Goods
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What are the two price of related good determinants?
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Substitutes and Complements
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What is the difference between Quantity Demanded and demand?
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Quantity Demanded moves horizontally along the x-axis and is influenced by price. Demand is a curve/line which moves left to right and is influence by determinants
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How is marginal cost illustrated part 1?
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1.Solve for P midpoint (vertical axis)
2. Solve for Qd midpoint (horizontal axis) 3. Equilibrium price is intersection which is then extended out to adjacent graph. |
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MC graph part 2
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1. P is y axis, Qd is x axis
2. Intersect line from previous graph represents MC curve |
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Total Revenue Equation
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P times Q PQ
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profit equation
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total revenue minus total cost
TR - TC |
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Profit Maximization steps
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1st solve P from Qd and Qs
2nd P = MC then solve for q 3rd substitute and solve for TC, TR, and profit (pie) |
