Micro Final

Front 1

salary changes and effects demand

Back 1

Ceteris Paribus is out

Front 2

normal good

Back 2

as income increases you buy more of good. ie, cars, clothes

Front 3

inferior good

Back 3

as income increases you buy less of good. ie, hamburder helper

Front 4

luxury good

Back 4

as income increases you buy a greater % than the increase in income. ie, BMW, jewlery

Front 5

economic expansion

Back 5

an increase in income for society as a whole. (increase in Y)

Front 6

economic contraction

Back 6

a decrease in income for society as a whole. (decrese in Y).

Front 7

Demand for goods during an expansion/contraction

Back 7

D for normal goods shifts to the right during an expansion.
D for inferior goods shifts to the righ during a contraction.

Front 8

price ceiling

Back 8

a government mandated price above which it is illegal to transact. ie, rent control

Front 9

price floor

Back 9

a government mandated price below which it is illegal to transact. minimum wage

Front 10

min. wage

Back 10

as it rises, unemployment increases by .001%

Front 11

elasticity

Back 11

how responsive one variable is to a change in another. this is usually applied to price, how much q changes when price goes up.

Front 12

elastic demand

Back 12

buyers are more responsive to change in price.

change in Q > change in P:
E>1

P up, TR down

Front 13

unitary elastic Demand

Back 13

change in Q = change in P:
E=1

Front 14

Inelastic Demand

Back 14

buyers are relatively unresponsive to P changes.

change in Q < change in P:
E<1

P up, TR up

Front 15

Perfectly Inelastic

Back 15

buyers are completely unresponsive to change in P.

Chnage in Q = 0:
E=0

Front 16

elasticity along a D curve

Back 16

as price increase, buyers become more responsive, or elastic.

Front 17

determinats of Elasticity

Back 17

Price, availability of substitutes, and income of elasticity.

Front 18

cross price elasticity

Back 18

measures buyers relative responsiveness to a change in P of one good in terms of QD of another good. how markets affect one another.

E=+ substitute
E=- Compliment

Front 19

surplus of benefit

Back 19

when someone was willing to pay a lot for a good, but got it at Pe.

Front 20

Total Surplus(TS)=

Back 20

Producer surplus(PS) + Consumer Surplus(CS)

Front 21

Market clearing Price

Back 21

Supply and Demand equilibrium.
Most social welfare.
TS is at maximum.

Front 22

Market Failure happens when:

Back 22

insufficient competition
good is not purely private

Front 23

externalities

Back 23

Benefit or Cost of an individual activity that is not recieved

Front 24

types of externalities

Back 24

Positive consumption: xmas lights
Negative Consumption: Loud Stereo
Positive Production: Research and Development
Negative Production: Pollution

Front 25

how to address externalities:

Back 25

piguvian Tax, Piguvian Subsidy

Front 26

public good

Back 26

common resource, benefits everyone, non excludable, non rival. ie, Park, national defense, grass.

Front 27

firm

Back 27

an organization that produces output for outsiders

Front 28

Profit =

Back 28

TR-TC

Front 29

Variable inputs

Back 29

inputs that can be changed.
labor, utilities, parts

Front 30

fixed inputs

Back 30

inputs that can not be changes.
always at least one.
capitol=buildings

Front 31

fixed costs

Back 31

costs associated with the fixed inputs.
can not be changed

Front 32

variable costs

Back 32

costs associated with the variable inputs.
can be changed.

Front 33

total cost=

Back 33

Total fixed cost + total variable cost

Front 34

production function

Back 34

depicts maximum amount of output a firm can produce for a given set of inputs. (Cobb Douglas function)

Front 35

law of deminising returns of labor

Back 35

if there exist as least one fixed input, than as the employment of remaining inputs increase, eventually the rate at which outputs rise will deminish.

Front 36

Decresing return to scales

Back 36

as capital increases, LRATC increases

Front 37

increasing return to scales

Back 37

as capital increases, LRATC decreases

Front 38

constant return to scale

Back 38

as capital increases, LRATC stays the same.

Front 39

Competitive firms

Back 39

Homogeneous goods
many buyers and sellers
free exit and entry
no transaction cost
perfect information
firms are price takers

Front 40

conduct of competitive market

Back 40

will produce up to where MC=MR
supply curve is MC curve (as long as it is above shutdown point).

Front 41

short run shutdown point

Back 41

firm will not sell anywhere below this point.
lowest point of AVC curve

Front 42

performance of Competitive markets

Back 42

economic profits tend towards 0
firms can only make a profit in the short run (this is why they have an incentive to innovate).

Front 43

monopolistic firms

Back 43

only seller of a good
no free entry
no close substitutes
price setters
no incentive to innovate

Front 44

natural monopoly

Back 44

too expensive for firms to get into. electric

Front 45

pure monopoly

Back 45

not allowing other firms to get into market, illegal.

Front 46

anti-trust law`

Back 46

economy functions best when competitors have limits

Front 47

sherman anti-trust act

Back 47

1880,
prevents ind. from deciding how the market will be run
there are no more pure monopolies

Front 48

collusion

Back 48

rival companies joining for benefit

Front 49

price fixing

Back 49

aggrement to sell at same price

Front 50

price descrimination

Back 50

charging different prices

Front 51

mlb

Back 51

antitrust exemption