# Shared Flashcard Set

## Details

Micro-Economics 115 Mid-term
n/a
23
Economics
02/15/2012

## Additional Economics Flashcards

Term
 Opportunity Cost
Definition
 The cost associated with forgoing the opportunity to employ a resource in its best alternative use.
Term
 Inferior good
Definition
 A good that when income increases, the amount demanded decreases
Term
 Fixed cost
Definition
 A cost associated with production that does not vary with the amount of output; the cost can only be avoided if no good is produced
Term
 Law of Demand
Definition
 The state of goods where as the price goes up, the quantity demanded increases
Term
 Normal good
Definition
 A good for which the demand increases as income increases, and demand falls as income falls
Term
 Burden of a Tax
Definition
 the analysis on who bears the burden of a tax. This depends on the price elasticity of both supply and demand
Term
 Inelastic demand
Definition
 when the elasticity of demand is between -1 and 0, or when the percentage change in the amount demanded is smaller than the percentage change in price
Term
 Budget constraint
Definition
 a limiting factor on how much one can consume, whether it be time, money, or other constraint
Term
 Marginal utility
Definition
 the change in the consumer's utility resulting from the addition of an amount of a good divided by the amount added (new-old/new)
Term
 Money metric utility
Definition
 a function that describes your preferences through what you bought plus the money left over Utility= U(x)+M
Term
 Individual vs. Markey Demand Curve
Definition
 one describes the relationship between the price of a good and the amount a particular consumer purchases. The other is a relationship between the price and the sum of the amount consumers purchase
Term
 Indifference curve
Definition
 A graph which shows all the alternatives that a consumer likes equally well.
Term
 Iso-quant
Definition
 A graph that identifies all the input combinations that produce a given amount of outputs.
Term
 Iso-cost
Definition
 Shows all combinations of inputs which cost the same total amount
Term
 Production function
Definition
 the equation which states that the output of a firm is the function of its input factors (like labor and capital)
Term
 Cost function
Definition
 describes the total cost of producing each possible level of output
Term
 Sunk costs
Definition
 Costs that once paid, cannot be recovered. THey do not (should not) affect production decisions, exit, or entry
Term
 Sunk cost fallacy
Definition
 misallocates resources by depending on information that is irrelevant to the decision being made -- i.e. thinking that the cost should factor into some decision made (feeling obligated to go to the movies once a ticket is bought)
Term
 Elasticity
Definition
 a unit free measure of the steepness of a curve. Helps to understand the change in quantity associated with a given change in price. (change in quantity/change in price)
Term
 Elasticity of supply
Definition
 What the percentage change is in quantity supplied for a given price change (positive)
Term
 Elasticity of demand
Definition
 Negative. Perfectly elastic _______ is demonstrated by a horizontal line. If price is higher, no one will buy. If price is lower, no one will buy
Term
 Perfect complement
Definition
 A good whose demand works in conjuction with another good. Therefore, if the demand of one goes up, the demand of the other goes up. (E.g. tea and lemons, right shoes and left shoes)
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