question

income elasticity of demand

answer

% change in quantity demanded / % change in income (dQ/dY * Y/Q)

question

substitution effect

answer

the change in quantity demanded when the good's price increases, holding other prices and consumer utility constant

question

income effect

answer

the change in quantity demanded when purchasing power (income) changes, holding prices constant.

question

MRS (marginal rate of substitution)

answer

- dq2/dq1 or the negative marginal utility of good 1/ marginal utility of good 2

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MRT (marginal rate of transformation)

answer

- p1/p2

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MPL (marginal product of labor)

answer

dq/dL

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APL (average product of labor)

answer

q/L

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MRTS (marginal rate of technical substitution)

answer

-MPL/MPK

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law of diminishing marginal utility

answer

dMPL/dL

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Returns to scale

answer

rate at which output increases as inputs are increased proportionately

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constant returns to scale

answer

When input increased equals the increase in output

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increasing returns to scale

answer

When input increase is less than then increase in output

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decreasing returns to scale

answer

When increase in inputs is greater than the increase in output

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Cobb-Douglas Returns to Scale

answer

q = AL^aK^b

a+b = 1 Constant RTS

a+b > 1 Increasing RTS

a+b < 1 Decreasing RTS

a+b = 1 Constant RTS

a+b > 1 Increasing RTS

a+b < 1 Decreasing RTS

question

CES (Constant Elasticity of Substitution utility function)

answer

[q1^𝞺 + q2^𝞺]^(1/𝞺).

0 != 𝞺 <= 1 , 𝞼 = 1/(1-𝞺)

0 != 𝞺 <= 1 , 𝞼 = 1/(1-𝞺)

question

Demand Functions of a CES

answer

qi = [pi^(1-𝞼)/(p1^(1-𝞼) + p2^(1-𝞼))] * (Y/pi)

i = 1, 2

i = 1, 2

question

Cobb-Douglas

answer

U(q1, q2) = q1^a * q2^b

question

Demand function of Cobb Douglas

answer

q1 = (a/a+b)(Y/p1) , q2 = (b/a+b)(Y/p2)

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MRS of a Cobb Douglas

answer

-(a/a-1)(q2/q1)

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Incident of a small per unit tax on consumer

answer

n / n - e (n = elasticity of supplier, e = elasticity of demand)

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Profit Maximizing solution for Monopolists

answer

MR = MC

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Long-Run Supply Curve

answer

Min of AC curve

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Revenue

answer

p(x) * q

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maximizing utility

answer

MRS = MRT

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Profit maximizing scenario for competitive firms

answer

p = MC

question

Proft = 0 for competitive firms @

answer

MC = AC

question

Finding Shutdown Scenario

answer

q @ AVC = MC

if p < AVC(q) shutdown

if p < AVC(q) shutdown