Topic 3 Utility, Demand, Outputs And Costs

Front 1

Utility

Back 1

The benefit our satisfaction that a person gets from the consumptionof goods and services

Front 2

TOtal utility

Back 2

The total benefit that a person gets from the consumption of goods and services

Front 3

Marginal utility

Back 3

Change In total utility that results from an one-unit increase in the quantity of a good consumed

Front 4

Diminishing marginal utility

Back 4

Decrease in marginal utility as the quantity of a good consumed increases

Front 5

Consumer equilibrium

Back 5

A situation in which the consumer has allocated all his/her available income on a way that, given the prices of goods and services, maximizes his/her total utility

Hint 5

Mu/p

Front 6

How do you get the maximum attainable utility?

Back 6

Have more of the higer mu/r good and les of the other

Front 7

What happens when the price falls?

Back 7

Good 1 moves down(along) the demand curve and good 2 shifts to the left

Hint 7

Good 1 is cheaper so you would buy more of it and less of its substitutes(good 2)

Front 8

What happens when good 2's price increases?

Back 8

The demand curve of good 1 shifts to the right and good 2 with move up along the curve

Hint 8

Good 2 becomes more costly so you will Buy less of it and more of its substitutes

Front 9

What happens when there is a rise in income?

Back 9

People will buy more of the normal good and less of the inferior good.

Front 10

Marginal benefit

Back 10

The maximum price a consumer is willing to pay for an extra unit of a good or service when utility is maximized

Front 11

Firm

Back 11

An institution that hires factpra of production and organizes those factors to produce and sell good and services

Front 12

Opportunity cost

Back 12

Highest value alternative forgone

Front 13

Explicit costs

Back 13

Paid in money

Front 14

Implicit costs

Back 14

Loss of opportunity In the use of the company's own resources

Front 15

Normal profit

Back 15

The return an entrepreneur can expect to receive on average

Front 16

Economic profit

Back 16

Total revenue minus total costs(explicit+implicit)

Front 17

SHORT RUN

Back 17

Time frame in which the quantity of at least one factor of production is fixed

Front 18

Long run

Back 18

Time frame in which the quantotoes of all factors of production can be varied

Front 19

Sunk cost

Back 19

The past expenditure on a factory that has no resale value

Front 20

Short-run technology constraint

Back 20

To increase output, increase quantity of labour

Front 21

Total product

Back 21

The maximum output that a given quantity of labour can produce

Front 22

Marginal product

Back 22

The increase in total product that results from an one-unit increase in the quantity of labour employed with all other inputs remaining the same

Front 23

Average product of labour

Back 23

The total product/ quantity of labour employed

Hint 23

Average product- how productive workers are on the average

Front 24

Tpc attainable region below the curve

Back 24

are inefficient coz they use more labour than necessary to produce a given output

Front 25

How is marginal product measured on the tpc?

Back 25

By the slope/gradient

Front 26

Increasing marginal returns

Back 26

The marginal product of an additional worker exceeds the marginal product of the previous worker

Front 27

Diminishing marginal returns

Back 27

Marginal product of an additional worker is less than the marginal product of the previous worker

Front 28

Law of diminishing returns

Back 28

As the firm uses more of a variable factor of production, with a given quantity of the fixed factor of production, the marginal product of the variable factor eventually diminishes

Front 29

When is the average product the largest

Back 29

When the average product and marginal product are equal

Front 30

Total costs

Back 30

The costs of all the factors of production it uses

Front 31

Total fixed costs

Back 31

The costs of the firm's fixed factors

Front 32

Total variable cost

Back 32

The cost of the firms variable factors

Front 33

Margina cost

Back 33

Increase in total cost that results from a one-unit Increase in output

Front 34

Average fixed cost

Back 34

Total fixed cost per unit of output

Front 35

Average variable cost

Back 35

Total variable cost per unit of output

Front 36

Average total cost

Back 36

Total cost per unit of output

Front 37

2 things to remember

Back 37

Because of the two opposing forces:

1. Spreading total fixed cost over a larger output

2. Eventual diminishing returns

Front 38

Explain the relationship between technology and costs

Back 38

As labour increase initially,mp and av. Product rise and mc and av.variable cost fall. At the point of maximum mp, mc is min. As labour increase further, marginal product diminishes and marginal cost increases, av. Product continues to rise and av.variable continues to fall. Then, at point of maximum av product, av variable cost increase

Front 39

Technology...

Back 39

Increases labour(tvc) and decreases equipment(tfc)

Productivity increases, tfc, mpc, apc shifts upwards

Codts decrease, a/tc, a/vc, a/fc shifts upwards

Front 40

Prices of factors of production

Back 40

Fc increases,tfc, afc, tc shifts upwards

Vc increases, tvc, avc and mc shorts upwards

Front 41

Diminishing returns

Back 41

Occur at all four quantities of capital as the quantity of labour increase s

Front 42

Marginal product of capital

Back 42

Change in total product divided by the change when the quantity of labour is constant

Front 43

Why is the sort run average total cost curve u shaped?

Back 43

As the quantity of labour increases, it's marginal product at first increases and then diminishes

Front 44

The economically efficient factory size for producing a given output is the one that has the...

Back 44

Lowest average total cost

Front 45

Long-run average cost curve

Back 45

The relationship between the lowest attainable average total cost and output when both the factory size and labour are varied

Front 46

Economies of scale

Back 46

Are features of a firms technology that lead to falling long-run average cost as output increases

Hint 46

Percentage increase in output exceeds tge percentage increaee in all factors off production

Front 47

Diseconomies of scale

Back 47

Are features off a firms technology that lead to rising long-run average costs as output increases

Hint 47

The percentage increase in output is less than the percentage increase in all factors of production

Front 48

Constant returns to scale

Back 48

Are features in a firms technology that lead to constant long-run average cost as output increases

Hint 48

Percentage increase in output equals the percentage increase in all factors of production

Front 49

Minimum efficient scale

Back 49

The smallest quantity of output at which long-run average cost reachex its lowest level