question
price-consumption curve
answer
a line through bundles at each price of one good (X) when the price of the other good (Y) and the budget are held constant
question
Engel Curve (Normal Good)
answer
as income goes up, you buy more goods
positive slope
positive slope
question
income-consumption curve
answer
shows how consumption of both goods change when income changes while prices are help constant
question
engel curve (inferior good)
answer
negative slope
question
substitution affect
answer
the change in quantity demanded that is caused by substituting one good for another (move along the same indifference curve)
question
with substitutes, if the price of X falls...........
answer
substitute more of good X for less of good Y
question
with substitutes, if the price of X rises............
answer
substitute more of good Y for less of good X
question
income effect
answer
the change in the quantity demanded due to a change in income (move to a new indifference curve)
question
total effect from price change
answer
substitution effect + income effect
question
budget constraint
answer
causes line to become steeper and pivot in
question
short-run costs
answer
capital is fixed and labor is variable (can't change all inputs)
question
long-run costs
answer
all inputs are variable and can be changed
question
inputs
answer
capital and labor
question
opportunity cost
answer
value of the best alternative use of a resource
question
variable cost (VC)
answer
a production expense that changes with the quantity of output produced
question
Fixed cost (FC)
answer
production expense that does not vary with output
question
total cost
answer
variable cost + fixed cost
TC=wL+rK
TC=wL+rK
question
sunk cost
answer
a past expenditure that cannot be recovered
question
Marginal cost (MC)
answer
the amount by which a firm's cost changes if the firm produces one more unit of output
MC= change in total cost / change in output
MC= change in total cost / change in output
question
average fixed costs (AFC)
answer
fixed cost / units of output produced
question
average variable cost (AVC)
answer
variable cost / units of output produced
question
average total cost (AC)
answer
total cost / units of output produced
question
isocost line
answer
all the combinations of inputs that require the same (iso) total expenditure (cost)
TC= wL+rK
TC= wL+rK
question
isoquants
answer
a curve that shows the efficient combinations of labor and capital that can product a single level of output
q= f(L,K)
q= f(L,K)
question
inelastic price of demand
answer
not responsive
question
elastic price of demand
answer
responsive
question
increasing returns of scale
answer
if you double inputs and output more than doubles
question
decreasing returns to scale
answer
if you double inputs and output less than doubles
question
constant returns to scale
answer
if you double inputs and outputs exactly doubles
question
total revenue
answer
price x quantity
question
elasticity
answer
compares the impact of price change
question
price elasticity of supply
answer
measures responsiveness of quantity supplied to price changes
question
price elasticity of demand formula
answer
percentage change in Q^d / percentage change in P
question
elastic demand
answer
a higher price reduces revenue
question
inelastic demand
answer
a higher price increases revenue
question
perfectly elastic
answer
horizontal demand curve (a increase in price causes an infinite change in quantity demanded)
question
perfectly inelastic
answer
vertical demand curve (a change in the price does not cause change in the quantity demanded)
question
price elasticity of supply formula
answer
% change in quantity supplied / % change in price
question
normal goods
answer
positive income elasticity (includes necessary and luxury goods)
question
luxury goods
answer
goods that we splurge on (income goes up 1%, buys 3%)
question
inferior goods
answer
negative income elasticity (as income goes up, you buy less)
question
necessary goods
answer
saving on these goods to buy the luxury goods (income goes up 2%, buys 1% of these goods)
question
cross-price elasticity of demand
answer
measures the response of demand for one good to changes in the price of another good
question
cross-price elasticity of demand formula
answer
% change in quantity of X demanded / % change in price of Y
question
cross price substitutes
answer
positive
question
cross price complements
answer
negative
question
production function
answer
shows the relationship between inputs and output, given current technology
question
production function formula
answer
Q=f(K,L)
question
marginal product of labor
answer
the change in total output, resulting from using an extra unit of labor holding other factors constant
question
marginal product of labor formula
answer
MPL=(change in Q)/(change in L)
question
average product of labor (APL)
answer
the ratio of output, q, to the number of workers, L, used to produce that output
Q/L
Q/L
question
marginal rate of technical substitution (MRTS)
answer
the rate at which one input (capital) can be exchanged for another input (labor) without changing the total level of output produced
question
marginal rat of technical substitution (MRTS) formula
answer
change in capital(K) / change in labor(L)
question
isoquant slope
answer
ΔK/ΔL = -[MP(L)/MP(K)]
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
