Term
|
Definition
| production cost per unit of output, divide total fixed costs and variable costs by total output e.g. AC = AVC + AFC |
|
|
Term
|
Definition
| fixed costs of production divided by the quantity of output e.g. AFC = TC/Q |
|
|
Term
| average productivity of labor |
|
Definition
| the output per unit of labor input e.g. APL = Q/L |
|
|
Term
|
Definition
| represents the possible combo of goods/services that a consumer can purchase given current prices and income |
|
|
Term
|
Definition
| occurs when two or more firms enter into agreements to restrict the supply or fix the price of a good in a particular industry |
|
|
Term
|
Definition
| "all things constant;" effect of one economic variable (X) on another (Y) while holding constant all other variables |
|
|
Term
|
Definition
| complements are products that increase the value of other products and are related in such a way that an increase in price of one reduces the demand for both |
|
|
Term
| constant returns to scale |
|
Definition
| when the percentage change in a firm's input is exactly equal to the percentage change in the firm's output |
|
|
Term
|
Definition
| the amount that consumers benefit by being able to purchase a product for a price that's less than the most they would be willing to pay |
|
|
Term
|
Definition
| problem of the firm to choose a combo of inputs for the level of output that costs as little as possible |
|
|
Term
| cross price elasticity of demand |
|
Definition
| the responsiveness of a demand for good X following a change in the price of good Y |
|
|
Term
|
Definition
| the lost part of consumer surplus due to an inefficiency ex: monopoly pricing |
|
|
Term
| decreasing returns to scale |
|
Definition
| occurs when the percentage change of output increase by less than the percentage change in input |
|
|
Term
| diminishing marginal productivity |
|
Definition
| the marginal increase in total output declines with increase in additional units of a variable input after a certain point |
|
|
Term
|
Definition
| equilibrium in monopoly occurs when marginal costs (MC) are equal to marginal revenues (MR) |
|
|
Term
|
Definition
| a cost that does not change with an increase of decrease in the amount of goods or service provided |
|
|
Term
| income elasticity of demand |
|
Definition
| the responsiveness of the demand for a good/service to a change in the income of the consumer |
|
|
Term
| increasing returns to scale |
|
Definition
| as the percentage change in input increases, the percentage change in output increases, but not in fixed quantities |
|
|
Term
|
Definition
| graph showing possible combos of goods where a consumer is indifferent; at each point in the curve, the consumer has no preference of one point over the other |
|
|
Term
| inferior and normal goods |
|
Definition
| inferior goods are goods that decrease in demand when the consumer's income increases; normal goods are goods that increase in demand when the consumer's income increases |
|
|
Term
|
Definition
| the instability of the cartel can be due to: falling demand that creates tension between firms, non-cartel actors entering market and putting pressure on the cartel price, corruption, and illegality |
|
|
Term
|
Definition
| an isocost line shows all combos of inputs which cost the same total amount |
|
|
Term
|
Definition
| a graph of all possible combos of inputs that result in the production of a given level of output |
|
|
Term
|
Definition
| states that an increase in price results in an increase in quantity supplied, ceteris paribus |
|
|
Term
|
Definition
| change in total cost divided by a change in quantity e.g. MC = deltaTC/deltaQ |
|
|
Term
| marginal productivity of labor |
|
Definition
| the change in output that results from employing an added unit of labor |
|
|
Term
| marginal productivity of capital |
|
Definition
| additional output resulting from the use of an additional unit of capital |
|
|
Term
| marginal rate of substitution (X in terms of Y) |
|
Definition
| the rate at which a consumer is ready to give up one good (X) in exchange for another good (Y) while maintaining the same level of utility |
|
|
Term
| marginal rate of technical substitution |
|
Definition
| shows the rate at which inputs may be substituted while the output level remains constant. |
|
|
Term
|
Definition
| the change in total revenue resulting from a one unit change in sales |
|
|
Term
|
Definition
| the change in total satisfaction derived from one additional unit of a specific product |
|
|
Term
|
Definition
| the amount of goods or services sought by buyers is inequal to the amount of goods or services produced by sellers |
|
|
Term
|
Definition
| the amount of goods or services sought by buyers is equal to the amount of goods or services produced by sellers |
|
|
Term
|
Definition
| the number of firms producing identical products |
|
|
Term
|
Definition
| market form in which a market or industry is dominated by a small number of sellers |
|
|
Term
| opportunity cost (X in terms of Y) |
|
Definition
| the opportunity cost of X in terms of Y is the amount of Y you need to forgo in order to obtain one more unit of X |
|
|
Term
| optimal bundle in consumption |
|
Definition
| the point on the budget line that maximizes a consumer's total utility |
|
|
Term
| ordinal and cardinal utility |
|
Definition
| ordinal utility is based on incremental, numeric pieces of data; cardinal utility is utility that is based on non-numeric rankings |
|
|
Term
|
Definition
| an ideal market structure characterized by a large number of small firms, identical products sold by all firms, freedom of entry into and exit out of the industry, and perfect knowledge of prices and technology |
|
|
Term
| perfectly competitive long-run market equilibrium |
|
Definition
| a perfectly competitive market achieves long-run equilibrium when all firms are earning zero economic profits and when the number of firms in the market is not changing |
|
|
Term
|
Definition
| a good's demand is increased when the price of another good is decreased. conversely, the demand for a good is decreased when the price of another good is increased. |
|
|
Term
|
Definition
| government-imposed limit on the price charged for a product. governments intend price ceilings to protect consumers from conditions that could make necessary commodities unattainable |
|
|
Term
|
Definition
| a function that specifies the output of a firm or market for all combinations of inputs |
|
|
Term
|
Definition
| quantity demanded is extremely responsive to even a small change in price |
|
|
Term
| perfectly inelastic demand |
|
Definition
| quantity demanded is completely unresponsive to a change in price |
|
|
Term
| production possibility frontier |
|
Definition
| shows all possible combinations of two goods that can be produced simultaneously during a given period of time, ceteris paribus |
|
|
Term
|
Definition
| principle that assumes that individuals always make prudent and logical decisions that provide them with the greatest benefit or satisfaction and that are in their highest self-interest |
|
|
Term
| profit maximization condition in perfect competition (golden rule) |
|
Definition
| profits are maximized where MR=MC |
|
|
Term
| short-run and long-run in production |
|
Definition
| short run is defined in economics as a period of time where at least one factor of production is assumed to be in fixed supply i.e. it cannot be changed; in the long run, all factors of production are variable |
|
|
Term
| short-run supply of the firm in perfect competition |
|
Definition
| the short-run supply of the firm in perfect competition is the MC |
|
|
Term
|
Definition
| substitute good, in contrast to a complementary good, is a good with a positive cross elasticity of demand. this means a good's demand is increased when the price of another good is increased. conversely, the demand for a good is decreased when the price of another good is decreased |
|
|
Term
|
Definition
| describes the total economic cost of production e.g. VC + FC |
|
|
Term
| total production of capital |
|
Definition
| describes the relationship between capital and labor given a fixed amount of labor |
|
|
Term
| total production of labor |
|
Definition
| the amount of output obtained with any possible amount of labor when capital is fixed |
|
|
Term
|
Definition
| total amount of money firm has made; price per unit sold times the number of units sold |
|
|
Term
| utility maximization condition for imperfect substitutes |
|
Definition
| utility is maximized when budget is exhausted and both items are represented |
|
|
Term
|
Definition
| variable costs are expenses that change in proportion to the activity of a business, first part of cost function ex: TC = Q3 +6Q + 200 VC = Q3 + 6Q |
|
|
