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Details Title: Microeconomics Description: Term for Exam 2 Total Flash Cards: 25 Created: 02/26/2006 14:27:40	To study from this set of flash cards, or to create your own your own study flash cards, register HERE. If you are already a registered user, CLICK HERE.
Cards Term Consumer Surplus Definition Willing to Pay - Actual Cost Term Law of Diminishing Marginal Utility Definition as a person increases the consumption of a product--while keeping comsumption of other products constant-- there is a decline in the marginal utility that person derives from consuming each additional unit. Term Elasticity Definition measure of relative representativeness of 1 variable to a change in another Term Price Elasticity of Demand Definition measure of buyers relative responsiveness to a price change Term Elasticity Coefficient Definition Ep = % change in Qd/% change in P Term Perfectly Elastic Definition Ep = infiniity (striaght horizontal line on graph) Term Perfectly Inelastic Definition Ep = 0 ( straight vertical line on graph, no substitute) Term Profit Definition Total Revenue - Total Cost Term Price Elasticity of Supply Definition % change in Qs/ % change in P Term Income Elasticity of Demand Definition Ei = % change in Qd/ % change in Income Term Cross Price Elasticity Definition Ec = % change in Qd of x/ % change in P of x Term Opportunity Cost of Capital Definition rate of return for next best investment Term Accounting Profit Definition TR - Accounting(Explicit) Cost Term Economic Profit Definition TR - Economic Cost Term Normal Rate of Return Definition doing just as well as you would in another industry Term Short Run Definition amount of time insufficient to allow usage of all inputs to vary Term Long Run Definition No fixed costs; entry and exit are possible--> exit one industry, stop spending money in that market Term Fixed Costs: Definition can't be varied in the short run, don't change as output changes, still exist when Q = 0, and usually are associated with capital Term Total Cost Definition = TFC + TVC Term Marginal Cost Definition additional cost associated with 1 unit increase in Q; MC = change in TC Term Law of Diminishing Marginal Returns(to a fixed factor) Definition adding more and more of a variable input to a fixed input results in smaller additions to output; strictly applies to the short run; explains why SR curve increases as output increases. Term MArginal Product of Labor(MPL) Definition additional output produced by 1 more worker. Term Unit Elasticity Definition Ep = 1% , change in Qd = % change in P Term Elastic Definition Ep > 1% , change in Qd > % change in P Term Determinates of Elasticity: Definition time in which to make the purchase, # of availability of close substitutes, proportions of consumer budgets(inexpensive=inelastic, expensive=elastic), importance of item(necesscity= inelastic, luxury= elastic)