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Test 2
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36
Economics
Undergraduate 4
03/29/2013

Additional Economics Flashcards

 


 

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Term
Market period
Definition
Time period in which firms cannot adjust any of their inputs; all
inputs a re fixed; the firm can only produce with the resources on hand
Term
Short run
Definition
Time period in which the firm can vary several inputs, but at least one
input remains fixed. Generally labor is assumed to be variable and capital is assumed
to be fixed.
Term
Long run
Definition
Time period in which all inputs can be varied. The firm can now adjust
capital.
Term
Production function
Definition
Mathematical relationship between inputs and outputs; it indicates the
maximum number of units that can be produced from a given set of inputs.
Term
Total product(TP)
Definition
the total number of units produced
Term
Marginal Product (MP)
Definition
the additional output that is produced from an additional unit of the
variable input. In most circumstances this refers to the marginal product of labor, what happens
to Q when one more worker is hired.
MP = ∆Q/∆L
Term
Average Product (AP)
Definition
the number of units produced per worker
Term
Short Run MP Phenomena:
Definition
1) Increasing returns,2) Diminishing returns, 3) Negative returns
Term
Utility
Definition
is the want satisfying characteristic of goods and services
Term
Ordinal utility –
Definition
this type of utility rank orders a person’s preferences
For example:
Cap’n Crunch > Rice Krispies > Cheerios
Term
cardinal utility –
Definition
this type of utility assumes that utility can be measured
numerically
Term
Marginal
Definition
the extra; the increment; the additional; what has been added to the total;
Slope
Term
Marginal utility
Definition
the additional satisfaction received by the consumer from consuming
an additional unit of the good or service
MU = ∆TU/∆Q
Term
Total utility
Definition
total satisfaction accumulated from the consumption of a single or
multiple
units of a good or service
TU = ΣMU
Term
Budget constraint –
Definition
curve indicating all the possible combinations of 2 goods that can be
purchased if all income is spent, given the prices of the two goods.
Term
Indifference curve
Definition
curve indicating all combinations of 2 goods that give the
consumer the same level of utility, that is, total utility is constant along this curve
Term
Degrees of elasticity
Definition
Elasticity = 1 unitary
Elasticity > 1 elastic
Elasticity < 1 inelastic
Elasticity = 0 perfectly inelastic, vertical demand curve
Elasticity = infinity, perfectly elastic, horizontal demand
Term
Relationship to total revenue (expenditures)
Definition
Elastic P increase causes TR to decrease
Inelastic P increase causes TR to increase
Unitary P increase causes no change in TR
Term
Straight line demand curve and Ep
Definition
Top half—elastic
Midpoint – unitary
Bottom half- inelastic
Term
Demand is more elastic when:
Definition
There are a large number of substitutes
The consumer spends a large % of their income on the good
The good is a luxury compared to being a necessity
The longer the time frame
Term
Income elasticity
Definition
Ey > 0 normal
Ey < 0 inferior
Ey = 0 necessity
Ey > 1 luxury (positive sign only)
Term
Cross price elasticity
Definition
Ea,b > 0 then the goods are substitutes
Ea,b < 0 then the goods are complements
Term
Excise taxes
Definition
If demand is relatively inelastic (compared to supply) then consumers pay the larger portion of an increase in
excise taxes. If supply is relatively inelastic (compared to demand) then producers pay the larger portion of an
increase in excise taxes
Term
Consumer surplus
Definition
– The benefit or welfare gained by consumers from only having to
pay the equilibrium price for the good and not having to pay the highest price you were
willing to pay (reservation price, read from the demand curve).
Term
Producer surplus
Definition
The benefit or welfare gained by producers from receiving the
equilibrium price for the good and not having to accept the lowest price consumers are
willing to pay (reservation price, read from the demand curve
Term
Relations between Total benefit and
Marginal benefit
Definition
• TB = S MB
• MB = DTB/DQ
• If MB > 0 then TB rises
• If MB = 0 then TB is maximized
• If MB < 0 then TB falls
• Slope of TB = MB =DY/DX = DTB/DQ
Term
Rival –
Definition
One person’s consumption of the
good denies anyone else from consuming
that item (over a fixed time period)
Term
Non-Rival
Definition
Goods that can be consumed
simultaneously by more than one person
without hindering the ability of each to
consume
Term
Excludable –
Definition
These are goods which have
barriers to be overcome or criteria that must
be met in order for someone to have access
to obtain the good
Term
„ Non- excludable –
Definition
These are goods that
everyone has access to and there are no
criteria to be met for one to consume
Term
„ Pure private goods
Definition
„ Rival
„ Excludable
Term
Semi – Private goods
Definition
„ Excludable
„ Non-Rival
Term
Semi – Private Goods
Definition
Non-excludable
„ Rival
Term
Public Goods
Definition
Non-excludable
„ Non-rival
Term
negative externality
Definition
imposes costs on some
one who is neither the
consumer nor the
producer of the good.
Term
Positive externalities
Definition
provide benefits to
people who are neither
the producer nor the
consumer of the good.
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