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### 36 Cards in this Set

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• 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