Phm 103 Chapter 3 - 8

Front 1

demand is

Back 1

money consumer willing to pay for quantity at certain price

Front 2

shift demand curve

Back 2

income, taste, price of substitutes, price of complimentary goods

Front 3

movement along curve

Back 3

change in price of the good

Front 4

total utility is

Back 4

happiness people get from consuming g/s

Front 5

marginal utility is

Back 5

change in total utility with a one unit increase of quantity of g/s

the more g/s consumed, the less marginal utility we get (diminishing marginal utility)

Front 6

consumer surplus means

Back 6

$ people willing to pay compared to $ people actually paying

Front 7

PED

Back 7

% chg Q/% chg P

Front 8

PED >1

Back 8

elastic

Front 9

PED <1

Back 9

inelastic

Front 10

affecting PED

Back 10

availability of substitutes

proportion of income

time period

necessity

who pays

brand loyalty

Front 11

availability of substitutes, in PED

Back 11

more of substitutes, means PED >1, responsive elastic

Front 12

proportion of income, in PED

Back 12

larger the share required to buy good, means PED >1 responsive

Front 13

time period, in PED

Back 13

consumers do not always react to price change PED <1, inelastic, irresponsive

Front 14

necessity, in PED

Back 14

more of a need, lower the elasticity, PED <1, inelastic, irresponsive

Front 15

who pays, in PED

Back 15

consumer not directly paying, not responsive to price change, PED <1, inelastic

Front 16

brand loyalty to PED

Back 16

taste make people irresponsive to price change PED <1, inelastic

Front 17

supply curve is

Back 17

willingness to sell good

Front 18

PPF curve

Back 18

all points on PPF are technically efficient

Front 19

short run supply

Back 19

inputs fixed cannot be altered (staffing, needles, syringes)

Front 20

long run supply

Back 20

fixed inputs (buildings, equipment, vehicles)

Front 21

short run supply is

Back 21

scale efficient, returns to a factor

Front 22

long run supply is

Back 22

economies of scale, returns to scale

Front 23

returns to a factor is

Back 23

increasing one factor to make extra output, short run

Front 24

returns to scale is

Back 24

increasing all factors by same proportion to make extra output, long run

Front 25

scale efficiency is

Back 25

average cost AC at lowest to produce output, short run, spread fixed cost

Front 26

economies of scale is

Back 26

average cost AC decreases as output increases, AC > MC, long run, spread fixed cost

Front 27

diseconomies of scale is

Back 27

decreasing returns to factor, or, returns to scale/increasing factor prices

Front 28

producer surplus is

Back 28

price sold minus the minimum supply price; supplier profit

Front 29

producer surplus determined by

Back 29

price of good

input prices

prices of related goods

expect future prices

number of other suppliers

technology

Front 30

price of good does

Back 30

a movement along supply curve

Front 31

simple market model is

Back 31

perfect competition, where buyers and sellers come to exchange good and service by price signals

Front 32

shift of supply curve happens when

Back 32

cost reduction

taste

income

tech advance

Front 33

PC conditions are:

Back 33

homogeneous (same product)

many sellers and buyers

no barriers to entry

buyer and seller informed of price

firms are price takers

no externalities, no public goods

Front 34

Market failure happens when

Back 34

market is not allocatively efficient, no perfectly competitive, not optimal, inefficient

Front 35

MEPI is

Back 35

monopoly

externality

public good

information asymmetry

Front 36

monopoly criteria

Back 36

few providers

few close substitutes

barriers to entry

(gas, railway network, new drugs)

Front 37

monopoly sells product at

Back 37

MR marginal revenue = MC marginal cost to maximize profit; by restricting output

this will create economic profit (abnormal profit, supernatural profit)

TR-TC = economic profit, monopoly gain

Front 38

monopoly gain is

Back 38

economic profit, which is a loss of consumer surplus to become a producer surplus; this loss is why monopoly market is inefficient

Front 39

externalities is

Back 39

cost benefit from economic transaction that affects people not participating in the transaction

Front 40

positive externality is

Back 40

vaccination

Front 41

negative externality is

Back 41

smoking

Front 42

public good is

Back 42

non-rival (available for everyone)

non-excludable (never used up)

(free rider)

clean air, crime reduction, street lights, vaccination

Front 43

MR= MC important

Back 43

monopolist chose to maximize profit, from producing one more unit

Front 44

MR> MC

Back 44

business could produce extra unit to increase total profit

Front 45

MR < MC

Back 45

business produce extra unit will decrease total profit

Front 46

deadweight loss?

Back 46

is a loss to society