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Microeconomics
ECON 3910
55
Economics
Undergraduate 3
01/17/2012

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Term
positive analysis
Definition
assessment of expected, objective outcomes
Term
normative analysis
Definition
nonscientific value judgment
Term
markets
Definition
the interplay of all potential buyers and sellers of a particular commodity or service
Term
nominal (absoulute) price
Definition
not adjusted for the changing value of money
Term
real price
Definition
the nominal price adjusted for the changing value of money
Term
goal-oriented behavior
Definition
the behavior of market participants interested in fulfilling their own, personal goals
Term
rational behavior
Definition
the behavior of market participants based on a carefuul, deliberative process that weighs expected benefits and costs
Term
scarce resources
Definition
insufficient time, money, or other resources for individuals to satisfy all their desires
Term
basic assumptions about Market Participants
Definition
goal-orientated behavior, rational behavior, & scarce resources
Term
explicit costs
Definition
money used in the puruit of a goal that could otherwise have been spent on an alternative objective
Term
implicit costs
Definition
costs associated witht the individual's use of his/her time and other resources in the puruit of a particular activity versus alternatives
Term
opportunity (economic) cost
Definition
the sum of explicit and implicit costs
Term
accounting costs
Definition
costs reported in companies' net income statements generated by accountants
Term
sunk costs
Definition
costs that have already been incurred and are beyond recovery
Term
production possibility frontier (PPF)
Definition
a depiction of all the different combinations of goods that a rational actor with certain personal goals can attain with a fixed amount of resources
Term
law of demand
Definition
the lower the price of a good, the larger the quantity consumers wish to purchase
Term
normal goods
Definition
increase in income leads to greater consumption
Term
inferior goods
Definition
consumption falls when income rises
Term
complements
Definition
two goods that tend to be consumed together, so consumption of both tends to rise or flal simultaneously
Term
substitutes
Definition
goodsd that can replace one another in consumption
Term
movement along the demand curve
Definition
change in quantity demanded in response to a change in price, other factors holding constant
Term
shift of a demand curve
Definition
occurs with a change in factors, besides price that affects the quantity demanded at each possible price
Term
law of supply
Definition
higher the price of a good, the larger the quantity frims what to produce
Term
movement along supply curve
Definition
change in quantity supplied that occurs in response to a change in the good's selling price, holding other factors constant
Term
shift of a supply curve
Definition
occurs when the other factors, besides price, that affect output change
Term
equilibrium
Definition
quantity demanded equals quantity supplied at the prevailing price
Term
disequilibrium
Definition
quantity demanded and the quantity supplied are not in balance
Term
shortage
Definition
excess demand for a good
Term
surplus
Definition
excess supply of a good
Term
price ceiling
Definition
legislated maximum price for a good
Term
price floor
Definition
legislated minimum price for a good
Term
elasticities
Definition
measures of the magnitude of the responsiveness of any variable to a change in particular determinants
Term
price elasticity of a demand
Definition
measure of how sensitive qualtity demanded is to a change in a product's price
Term
elastic
Definition
price elasticity of demand exceeds 1.0 or unity
Term
inelastic
Definition
price elasticity of demand is less tha 10.0 or unity
Term
unit elastic
Definition
price elasticity of demand equals 1.0 or unity
Term
point elasticity formula
Definition
***write it out***
Term
arc elasticity formula
Definition
***write it out***
Term
economic "bads"
Definition
commodities of which less is preferred to more over all possible ranges of consumption
Term
economic "goods"
Definition
commodities of which more is better than less
Term
market baskets
Definition
combinations of goods
Term
indifference curve
Definition
a plot of all the market baskets the consumer views as being equally satisfactory
Term
indifference map
Definition
a set of indifference curves that shows the consumer's entire preference ranking
Term
marginal rate of substitution (MRS)
Definition
a measure of the consumer's willingness to trade one good for another
Term
diminishing MRS
Definition
a consumer's willingness to give up less and less of some other good to obtain still more of the first good
Term
economic "neuter"
Definition
a case in which the consumer doesn't care one way or another about a particular good
Term
perfect substitutes
Definition
the case where a a consumer is willing to substitute on good for another at some constant rate and remain equally well off
Term
perfect complements
Definition
goods that must be consumed in a precise combination in order to provide a consumer a given level of satisfaction
Term
budget constraint
Definition
the way in which a consumer's income and the prices that must be paid for various goods limit choices
Term
budget line
Definition
a line that shows the combinations of goods that can be purchased at the specified prices and assuming that all of the consumer's income is expended
Term
shifts in budget lines
Definition
income changes and price changes
Term
marginal benefit
Definition
the value the consumer derives from consuming one more unit of a good
Term
marginal cost
Definition
the cost of consuming one more unit of a good
Term
corner solution
Definition
a situation in which a particular good is not consumed at all by an individual consumer because the value of the first unit of the good is less than thecost
Term
composite good
Definition
a number of goods treated as a group
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