# Shared Flashcard Set

## Details

Manec 300 BYU - Exam 1
Manec 300 BYU - Exam 1
19
Economics
02/04/2012

## Additional Economics Flashcards

Term
 Use Rights
Definition
 Right to useRight to prevent useRight to alter
Term
 Alienability Rights
Definition
 a. Right to sell or reassign above rights (use rights fall in the value if alienability right is unbundled from property rights; need for secondhand markets)b. Value increases when you have alienability rights (I own a house. I have use rights. But, I also have the ability to sell the house (alienability rights), which makes my house more valuable.
Term
 Communal Property (Share and Share Alike)
Definition
 You and those in the boat have use rights
Term
 Public Property
Definition
 1) Everyone owns the boat2) You can't prevent others from getting in the boat
Term
 Private Property (Capitalism)
Definition
 1) You have all use rights2) Though you do get all the gains, you also bear risk a. Shirking --> Solution might be to rent the boat b. Randomness (problems that come up) --> Hire fishers & guarantee a wage of 5 fish
Term
 Marginal Personal Value
Definition
 What one is willing to pay for one more unit of XExample: If I eat 100 bananas, I won't pay much to get one more to eat
Term
 Elasticity
Definition
 How responsive is the amount demanded of a good to a change (either rise or fall) in its price?What you need to calculate: DELTA Q/(Q1+Q2) ----------------------- x -1 DELTA P/(P1+P2)1% change in the Y axis leads to a ___% change in the X axis….1% price increase lowers quantity by 2%...a elasticity of 2.
Term
 Inelastic
Definition
 If n < 1, then it is _______. This means you can increase price, decrease quantity, and increase revenue
Term
 Elastic
Definition
 If n > 1, then it is __________. This means you can increase price, decrease quantity, and decrease revenue
Term
 Unitary Elastic
Definition
 If n = 1, then it is ________. You cannot increase or decrease your price AND increase your revenue. It's at its max.
Term
 How to find the MR Curve
Definition
 Double the negative slope of the demand curve. So if P=60-.15Q, then you do 0 = 60-.30Q. Then you find Q= 200. Plug 200 into P=60-.15Q, then you find the price. This gives you the quantity and price of when _____ is 0 and the demand curve is unitary elastic.
Term
 Substitutes
Definition
 Goods that compete with each other. DVD vs. BluRay, Silk Milk vs. Regular Milk, etc.
Term
 Complements
Definition
 Goods that are typically consumed together. For instance, DVDs increase DVD player, TV, and audio sales.
Term
 Cross Elasticity
Definition
 Percentage change in the quantity demanded of a good, given a percentage change in the price of some other good. For instance, margarine and butter have a high __________ (.81 to be exact), which means if the price of butter increases by 1%, then there is a .81% increase in margarine sales.Complements have negative (low) _________ while substitutes (like margarine and butter) have high __________.
Term
 Income Elasticity
Definition
 The percentage change in the demand for a good given a percentage change in income. So, Restaurants have a high __________ of 1.48, which means if my income increases by 1%, then my demand for restaurants increases by 1.48%. Conversely, flour is at -.36, which means my demand decreases .38% for every 1% increase in income.
Term
 Second Law of Demand
Definition
 The longer the time allowed to adjust amount demanded in response to a price change, the greater is the change in amount demanded, that is, the greater the elasticity.
Term
 What determines elasticity?
Definition
 Availability of substitutesPrice of ComplementsSize of good in consumer budget (if salt doubled, you wouldn't care that much)Time period for consumer adjustment
Term
 Contractual Costs
Definition
 • Unavoidable (fixed...the lawnmower business has the fixed cost of the lawnmower)• Avoidable (variable...the gas it takes to mow a lawn)• Known prior to the activity
Term
 Non-contractual Costs
Definition
 • Unknown prior to the activity• "Rents" (economic term) or "Profits" (financial term) ○ Earning a profit is a cost. There is a cost to stock/share-holders. You need to earn that, otherwise you'll do something else. Things such as dividends and retained earnings are called quasi rents/ non-contractual costs
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