ECON 2302 Microeconomics Final

The study of the allocation, who gets what, of scarce resources to satisfy human wants

Study of economics in a local setting versus the whole world (Mom and Pop business)

Generally speaking statement. Ex: Generally speaking, Mrs. Best lets us out at 9:15

The phenomenon that markets promote efficiency through the incentives faced by individuals and firms

Was kidnapped and held for ransom when he was four. Graduated from the University of Glasgow and received a scholarship to Oxford at age 17. Wrote "An Inquiry Into the Nature and Causes of the Wealth of Nations." Has been called the "father of political economy."

It is a big part of our market economy. It gives buyers an easy means of comparing goods that can substitute for each other. It can determine a buyer to buy BCG clothing or Nike

People will buy more at a low price and less at a high price, generally speaking
(P ^ then Q v) (P v then Q ^)

The quantity supplied of a good vary directly with its price, generally speaking (P ^ then Q ^) (P v then Q v)

1.) Taste and preferences
2.) Income
3.) Prices of related goods
4.) The number of buyers
5.) Expectations regarding future prices, income, and product availability

One occurs whenever one or more of the factors change and the other only occurs with a change in the products price

The difference in what you pay and what you're willing to pay
($11 - actual price
-$5 - discount
=$6) - consumer surplus

A maximum price for a good. A binding price ceiling appears below equilibrium and causes a shortage

A period of time where all variables are fixed

A period of time where some variables are fixed

Wall climbing is fun, but climbing the same rock wall every time might make the experience less exciting over time

Utility is maximized when the marginal utility per dollar is equal across all goods

Shows all the combinations of two goods where the consumer is indifferent

Tells you what you can do realistically

= AFC+AVC or TC/Q

Increase in a firms LRATC as the size of the firm increases

Many buyers and sellers
Differentiated products
No barriers to market entry or exit
No long-run economic profit
Some control over price

It is charging different consumer groups different prices for the same product. An example would be that shopping at Costco might save you money, but you often need to buy in bulk

Example: There are 4 major companies (General Mills, Kellogg, Post, and Quaker) and of those 4 companies Quaker only has about 6% of its product in the market compared to the rest which has about 93%

It creates a discontinuity in the marginal revenue curve, allowing marginal cost to vary (from MC0 to MC1) while prices remain stable

The return on capital necessary to keep investors satisfied and keep capital in the business over the long run

How people can receive money from the government for free and still find more ways to earn money

The study of strategic decision making when multiple players each act in their own interests

What is; facts

Opinions, value judgements, what ought to be, what should be

The value of the next best alternative when you choose one thing over another

What to produce
How to produce it and for whom to produce it for

Where you have to be willing and able to buy a product

As income goes up, quantity of this good goes up and as income goes down, quantity of this food goes down

As the price of steak goes up, the quantity of chicken bought goes up. As the price of steak goes down, the quantity of steak bought goes up

As income goes up, the quantity of this good goes down. As income goes down, the quantity of this good goes up

As the quantity of cameras bought goes up, so does the quantity of SD cards because you cannot use one without the other

1.) Costs of the factors of production
2.) Price of related goods in production
3.) Expectations
4.) Number of sellers
5.) State of technology

Balance of supply and demand. It's where buyers and sellers are both happy

Occurs when prices deviate, or stray, from equilibrium

Prevents stores from raising prices above the average price of the past 30 days

The minimum price for a good. A binding price floor appears above equilibrium and causes a surplus

A hypothetical measure of consumer satisfaction

When something has been paid and cannot be returned such as time

Occurs when individuals take sunk costs into account when making decisions about the present or the future

Total revenue minus total cost
(TR - TC)

An example would be studying. The first 60 min. would be the optimum level of production and then the next 60 min. your level of production goes down, or diminishes. This will happen every 60 min. as your brain will become tired as well as your physical body

Costs that do not change as a firm's output expands or contracts. Examples would be lease payments, administrative expenses, property taxes, and insurance premiums.

Costs that vary with output fluctuations. Examples would be labor and material costs.

The change in the total cost for making one additional unit of an item

Represents the lowest unit cost at which any specific output can be produced in the long run, when a firm is able to adjust the size of its plant

Decreases in a firm's long-run average total cost as the size of a firm increases

One firm
No close substitutes for product
Nearly insuperable barriers to entry
Potential for long-run economic profit
Substantial market power and control over price

One firm's product is distinguished from another's through advertising, innovation, location, and so on

Fewer firms
Mutually interdependent decisions
Substantial barriers to market entry
Potential for long-run economic profit
Shared market power and considerable control over price

An agreement between firms in an industry to formally collude on price and output, then agree on the distribution of production

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When an industry has a large economy of scale such that the minimum efficient scale of operations is roughly equal to market demand

Laws designed to maintain competition and prevent monopolies from developing

Occurs whenever workers of equal ability and productivity are paid different wages or otherwise discriminated against because of their race, religion, gender, age, national origin, sexual orientation, disability, etc.