# Shared Flashcard Set

Test 2
n/a
36
Economics
03/29/2013

## Additional Economics Flashcards

Term
 Market period
Definition
 Time period in which firms cannot adjust any of their inputs; all inputs a re fixed; the firm can only produce with the resources on hand
Term
 Short run
Definition
 Time period in which the firm can vary several inputs, but at least one input remains fixed. Generally labor is assumed to be variable and capital is assumed to be fixed.
Term
 Long run
Definition
 Time period in which all inputs can be varied. The firm can now adjust capital.
Term
 Production function
Definition
 Mathematical relationship between inputs and outputs; it indicates the maximum number of units that can be produced from a given set of inputs.
Term
 Total product(TP)
Definition
 the total number of units produced
Term
 Marginal Product (MP)
Definition
 the additional output that is produced from an additional unit of the variable input. In most circumstances this refers to the marginal product of labor, what happens to Q when one more worker is hired.MP = ∆Q/∆L
Term
 Average Product (AP)
Definition
 the number of units produced per worker
Term
 Short Run MP Phenomena:
Definition
 1) Increasing returns,2) Diminishing returns, 3) Negative returns
Term
 Utility
Definition
 is the want satisfying characteristic of goods and services
Term
 Ordinal utility –
Definition
 this type of utility rank orders a person’s preferences For example: Cap’n Crunch > Rice Krispies > Cheerios
Term
 cardinal utility –
Definition
 this type of utility assumes that utility can be measured numerically
Term
 Marginal
Definition
 the extra; the increment; the additional; what has been added to the total; Slope
Term
 Marginal utility
Definition
 the additional satisfaction received by the consumer from consuming an additional unit of the good or service MU = ∆TU/∆Q
Term
 Total utility
Definition
 total satisfaction accumulated from the consumption of a single or multiple units of a good or service TU = ΣMU
Term
 Budget constraint –
Definition
 curve indicating all the possible combinations of 2 goods that can be purchased if all income is spent, given the prices of the two goods.
Term
 Indifference curve
Definition
 curve indicating all combinations of 2 goods that give the consumer the same level of utility, that is, total utility is constant along this curve
Term
 Degrees of elasticity
Definition
 Elasticity = 1 unitaryElasticity > 1 elasticElasticity < 1 inelasticElasticity = 0 perfectly inelastic, vertical demand curveElasticity = infinity, perfectly elastic, horizontal demand
Term
 Relationship to total revenue (expenditures)
Definition
 Elastic P increase causes TR to decreaseInelastic P increase causes TR to increaseUnitary P increase causes no change in TR
Term
 Straight line demand curve and Ep
Definition
 Top half—elasticMidpoint – unitaryBottom half- inelastic
Term
 Demand is more elastic when:
Definition
 There are a large number of substitutesThe consumer spends a large % of their income on the goodThe good is a luxury compared to being a necessityThe longer the time frame
Term
 Income elasticity
Definition
 Ey > 0 normalEy < 0 inferiorEy = 0 necessityEy > 1 luxury (positive sign only)
Term
 Cross price elasticity
Definition
 Ea,b > 0 then the goods are substitutesEa,b < 0 then the goods are complements
Term
 Excise taxes
Definition
 If demand is relatively inelastic (compared to supply) then consumers pay the larger portion of an increase in excise taxes. If supply is relatively inelastic (compared to demand) then producers pay the larger portion of an increase in excise taxes
Term
 Consumer surplus
Definition
 – The benefit or welfare gained by consumers from only having to pay the equilibrium price for the good and not having to pay the highest price you were willing to pay (reservation price, read from the demand curve).
Term
 Producer surplus
Definition
 The benefit or welfare gained by producers from receiving the equilibrium price for the good and not having to accept the lowest price consumers are willing to pay (reservation price, read from the demand curve
Term
 Relations between Total benefit and Marginal benefit
Definition
 • TB = S MB• MB = DTB/DQ• If MB > 0 then TB rises• If MB = 0 then TB is maximized• If MB < 0 then TB falls• Slope of TB = MB =DY/DX = DTB/DQ
Term
 Rival –
Definition
 One person’s consumption of the good denies anyone else from consuming that item (over a fixed time period)
Term
 Non-Rival
Definition
 Goods that can be consumed simultaneously by more than one person without hindering the ability of each to consume
Term
 Excludable –
Definition
 These are goods which have barriers to be overcome or criteria that must be met in order for someone to have access to obtain the good
Term
 „ Non- excludable –
Definition
 These are goods that everyone has access to and there are no criteria to be met for one to consume
Term
 „ Pure private goods
Definition
 „ Rival„ Excludable
Term
 Semi – Private goods
Definition
 „ Excludable„ Non-Rival
Term
 Semi – Private Goods
Definition
 Non-excludable„ Rival
Term
 Public Goods
Definition
 Non-excludable„ Non-rival
Term
 negative externality
Definition
 imposes costs on some one who is neither the consumer nor the producer of the good.
Term
 Positive externalities
Definition
 provide benefits to people who are neither the producer nor the consumer of the good.
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