# Shared Flashcard Set

## Details

Microecon Theory Exam 2
NA
25
Economics
10/19/2014

Term
 Price Consumption Curve
Definition
 Given I and Py, the price consumption curve shows the welfar maximizing combination of x and y at each level of Px.
Term
 Giffen Good
Definition
 As Px decreases (increases), AOTBE, consumption of a giffen good will decrease (increase)   (Px goes down, Qdx goes down/ Px goes up, Qdx goes up)
Term
 Substitution effect
Definition
 impact of a change in relative prices on the consumer's behavior
Term
 Income effect
Definition
 impact of a change in real income (purchasing power) on consumer's behavior   (as Px goes down, real income goes up)
Term
 Normal Good
Definition
 As real income goes up, Qx goes up
Term
 Inferior good
Definition
 As real income goes up, Qx goes down
Term
 Psuedo Budget Constraint
Definition
 -Parallel to the new budget constraint -Tangent to the initial indifference curve
Term
 Edgeworth Box
Definition
 Shows all possible allocations of 2 goods (x,y) between two people (A, B)
Term
 Production function
Definition
 Given current technology, the production function shows the physical relation between the firm's resource inputs and product output
Term
 Short run (operations)
Definition
 A period of time in which (at least) one input is fixed while the other inputs are variable ( k is fixed, L is variable)
Term
 Long run (strategic planning)
Definition
 A period of time in which all inputs are variable
Term
 Total Product of labor Schedule
Definition
 Given capital and technology, the TPL shows the level of output at each level of labor use
Term
 Marginal Product of Labor Schedule (MPL)
Definition
 Given capital and technology, the MPL is the change in output per unit change in labor use
Term
 Isoquant
Definition
 Alternative combination of labor and capital that yield the same level of OUTPUT
Term
 Marginal Rate of Substitution between labor and capital (MRTSLK)
Definition
 Given a unit change in labor, the (MRTSLK) is the change in capitalthat keeps output constant
Term
 Convexity
Definition
 As L goes up, and K goes down, (MRTSLK) goes down
Term
 Income  Elasticity of Demand
Definition
 EIX= %ΔQDX      %ΔI
Term
 APL
Definition
 At any level of labor use, APL = the slope of a line from the origin to the corresponding point on the TPL schedule
Term
 MPL
Definition
 At any level of labor use, MPL = the slope of a line tangent to the corresponding point on the TPL schedule
Term
 Relevant range
Definition
 Negatively sloped portion of the isoquant between horizontal and vertical tangent points (B and C)
Term
 w
Definition
 wage rate of labor
Term
 r
Definition
 rental price of capital
Term
 Isocost line
Definition
 given w and r, the isocost line shows the alternative combinations of labor and capital that have the same cost
Term
 Rule for least cost
Definition
 to produce a given output at least cost, use capital-labor combination on the isoquant where MRTSLK= w                                                              r
Term
 Output expansion path (OEP)
Definition
 given w and r, the output expansion path shows the least cost combination of labor and capital at each level of output
Supporting users have an ad free experience!