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| a small, incremental adjustment to an existing plan of action |
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| the impact of one person's actions on the well-being of a bystander. Ex. Pollution |
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| the ability of a single person or small group to unduly influence market prices. For ex., if everyone in the town needs water and there is only one well, the owner of the well is not subject to the competition with which the invisible hand might keep self interest in check. |
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| when the market, on its own, fails to produce an efficient allocation of resources |
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| the amount of goods and services produced from each unit of labor input. In nations where workers can produce a large quantity of goods and services per unit of time, the standard of living enjoyed by most is high. |
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| an increase in the overall level of prices in the economy that results from printing money |
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| what you give up to produce something. when opportunity cost is constant along a PPF, the curve is straight. |
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| when a firm/nation,etc. can produce both goods in question with the smallest amount of inputs |
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| the ability to produce a good at a lower opportunity cost than another producer, and though it's possible for one person to have an absolute advantage in both goods in a trade scenario, it is impossible for them to have a comparative advantage in both, since opportunity costs are inverse when compared from party to party |
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| a market in which there are many buyers and many sellers where each has a negligible effect on the market price. |
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| a price taker is a buyer or seller in a market who must accept the price the market determines. at the market price, buyers can buy all they want and sellers can sell all they want. |
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| a market with one seller. |
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| when the price of a good rises, the quantity demanded falls |
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| sum of all individual demands for a particular good or service |
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| a good whose demand falls when income falls |
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| a good whose demand rises when income falls (bus rides, 40s) |
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| When a fall in price of one good reduces the demand for another good. ex. frozen yogurt and ice cream |
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| goods that cause the demand for another good to rise when price falls . ex: hot fudge and ice cream |
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| when the price of a good rises, the quantity supplied of the good also rises |
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| sum of the supplies of all sellers |
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| things that can shift a supply curve |
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Definition
| input prices, technology, number of sellers |
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| the equilibrium price, quantity of goods supplied and demanded are equal |
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| situation where quantity supplied is greater than quantity demanded |
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| results in shortage. sellers can raise prices without anticipating a loss in sales. |
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Definition
measure of the responsiveness of quantity supplied or demanded to a change in one of its determinants, ie. price
%change in quantity demanded/supplied divided by %change in price |
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| midpoint formula or cross price elasticity |
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Definition
quantity two - quantity toneo / (quantity one + quantity two) / 2
divided by
price two minues price one / (price one plus price two) divided by two |
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| elasticity higher than one is considered |
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Definition
| elastic. quantity moves proportionately more than the price |
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| elasticity less than one is considered |
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Definition
| ineleastic. quantity moves proportionately more than the price |
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| when elasticity is exactly one we call that |
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| unit elasticity. quantity moves same amount as price |
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Definition
amount paid by buyers and received by sellers of the good
P x Q |
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| a legal maximum on the price at which a good can be sold |
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| a legal minimum on the price at which a good can be sold |
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| what happens when price ceiling is set below market clearing price? |
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Definition
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| what happens when price floor set above market clearing price |
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Definition
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| amt a buyer is willing to pay for a good minus the amt they actually pay. area above the price and below the demand curve |
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| amt a buyer paid for a good minus the seller's cost to produce it. area below price and above supply curve |
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Definition
value to buyers - cost to sellers
measure of market efficiency |
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Definition
t x Q
size of tax (height of triangle)
times quantity of tax (width of triangle |
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| fall in total surplus that results from a market distortion |
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| price of a good that prevails in the world market |
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| difference btwn domestic quantity demanded and domestic quantity supplied |
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| property of a good where a person can be prevented from using it |
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| property of a good where one person's use diminishes other people from using it |
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| common resources are used more than is desireable from the standpoint of society's wellbeing as a whole (natural resources) |
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| total revenue - total cost |
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Definition
| relationship between quantity of inputs used to make a good and quantity of output of that good |
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Term
| in a total cost curve, production curve gets.... |
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Definition
| flatter as production rises. higher production means that the kitchen is too crowded, so additional worker adds less to production than the previous worker and becomes more expensive. |
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| this is an example of diminishing... |
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Definition
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Term
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Definition
| is the increase in total cost that arises from an extra unit of production. reflects diminishing marginal production |
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Definition
| total cost divided by the quantity of output. reflects sum of average fixed and variable costs. |
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| average fixed cost always ..... |
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Definition
| declines as output increases because it is spread over more units |
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| after a certain point the average variable cost |
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Definition
| increases and becomes a dominant force, so average total cost rises, resulting in a U shape |
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Term
| firms choose to operate where marginal revenue |
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Definition
| equals marginal cost. in a competetive market, the market price is also the marginal cost and marginal revenue |
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Term
| in a perfectly competetive market, the elasticity of demand for an individual firm |
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Definition
| is very high. any price over the market price will not go |
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Definition
| arises because one firm can supply at a smaller cost to the entire market than two or more firms can. an example is municipal water. one firm has to invest in network of pipes, so its not worth it for another firm to invest in the same infrastructure. BARRIER TO ENTRY |
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| monopolys' demand curves are |
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Definition
| DOWNWARD SLOPING. they have to charge less if they want to sell more. this market demand |
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| price for a monopoly firm = |
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Definition
| price > marginal revenue, marginal cost |
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| price for a competetive firm |
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Definition
| price = (EQUALS) marginal revenue, marginal cost |
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Term
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Definition
| more outputs sold, quantity sold increases, revenue increases |
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Definition
| price falls, so revenue falls |
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Term
| in the long run, is something like a factory a fixed variable/cost? |
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Definition
| NOPE. but IS IN SHORT RUN |
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Term
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Definition
average revenue
average cost curve |
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Term
| marginal revenue can become negative when |
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Definition
| price (input) effect on revenue is stronger than output effect |
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Term
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Definition
| (Price minus average total cost) TIMES xxxxxxx Quanity |
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| when firms make profit and new firms enter market, what happens to each firm's demand curve individually? |
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Definition
| DECREASES AND LOSS OF PROFIT |
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| how do marginal costs and prices relate in a monopoly? |
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Definition
| price is more than marginal cost |
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Definition
| agreement between firms in a market of quantity produced or price to charge |
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Definition
| situation in which economic actors with one another. each choose best strag |
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Definition
| a few sellers with similar or identical products |
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Definition
| puts caps on production bc only certain amt will be sold. keeps market from becoming all the way competetive. raising price decreases profit, so price is less than monopoly price but more than competitive price |
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