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36 Cards in this Set

  • Front
  • Back
Maximum amount of money a consumer will give in exchange for a quantity of some commodity
Total Utility
Maximum amount of money a consumer will pay for an additional unit of some commodity
Marginal utility
Observation that additional units of a given commodity generally have decreasing value for a consumer
The "law" of diminishing marginal utility
Method for calculating choices that best promote the decision maker's objective
Marginal Analysis
Difference between total utility and total expenditures for a given quantity of some commodity
Consumer's surplus
Quantity demanded declines when consumer real income rises
inferior good
Horizontal summation of individual demand curves
Market demand curve
Observation that a lower price generally increase the amount of a commodity that people in a market are willing to buy.
The "law" of demand
Ratio of percent change in quantity demanded to percent change in price
Price Elasticity of Demand
A change in price leads to a more than proportionate change in quantity demanded
Elastic Demand Curve
A change in price leads to a less than proportionate change in quantity supplied.
Inelastic demand curve
A change in price accompanied by an equal proportionate change in quantity demanded
Unit-elastic demand curve
ratio of percentage change in quantity demanded to percentage change in income
income elasticity of demand
An increase in price of one good decreases the demand for the other
complements
An increase in the price of one good increases the demand for the other
substitute
Ration of percentage change in quantity demanded of one product to the percent change in the price of another
cross elasticity of demand
decsion that best serves the objectives of the decision maker, whatever those objectives may be
optimal decision
period of time during which none of a firm's commitments will have ended.
short run
period of time long enough for all of a firm's commitments to end.
long run
Costs which do not change when output rises or falls
fixed costs
costs that change as the level of production changes
variable costs
Graph of output generated by various quantities of one input holding other inputs fixed.
Total Physical Product
Increase in output that results from an additional unit of a given input, holding all other inputs constant
Average Physical Product
Increase in output that result from an addition unit of a given input, holding other inputs constant
Marginal physical product
Dollar value of output produced by an extra unit of input
Marginal revenue product
Increase in output greater then the proportionate increase in all inputs.
Economies of Scale (increasing)
Difference between total revenue and total costs
Total Profit
Net earnings minus a firm's opportunity cost of capital
Economic Profit
Price of output times quantity sold
Total Revenue
Total revenue divided by quantity of output
Average revenue
Addition to total revenue when producing one more unit of output
Marginal Revenue
Addition to profit by producing an additional unit of output
Marginal profit
Many small firms selling an identical product
Perfect competion
Agent or firm too small to affect the market price
price taker
Costs that depends upon the quantity of output
variable cost
The portion of the marginal cost curve that exceeds average variable cost
Firms supply curve