Term
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Definition
Right to use
Right to prevent use
Right to alter |
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Term
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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. |
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Term
| Communal Property (Share and Share Alike) |
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Definition
| You and those in the boat have use rights |
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Term
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Definition
1) Everyone owns the boat
2) You can't prevent others from getting in the boat |
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Term
| Private Property (Capitalism) |
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Definition
1) You have all use rights
2) 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 |
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Term
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Definition
What one is willing to pay for one more unit of X
Example: If I eat 100 bananas, I won't pay much to get one more to eat |
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Term
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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. |
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Term
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Definition
| If n < 1, then it is _______. This means you can increase price, decrease quantity, and increase revenue |
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Term
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Definition
| If n > 1, then it is __________. This means you can increase price, decrease quantity, and decrease revenue |
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Term
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Definition
| If n = 1, then it is ________. You cannot increase or decrease your price AND increase your revenue. It's at its max. |
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Term
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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. |
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Term
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Definition
| Goods that compete with each other. DVD vs. BluRay, Silk Milk vs. Regular Milk, etc. |
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Term
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Definition
| Goods that are typically consumed together. For instance, DVDs increase DVD player, TV, and audio sales. |
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Term
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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 __________. |
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Term
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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. |
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Term
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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. |
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Term
| What determines elasticity? |
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Definition
Availability of substitutes
Price of Complements
Size of good in consumer budget (if salt doubled, you wouldn't care that much)
Time period for consumer adjustment |
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Term
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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 |
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Term
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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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