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cross-price elasticity of demand (formula)
answer
Exy= % change in Qd of X / % change in P of Y
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What is cross-price elasticity of demand?
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The measure of Demand in response to one Good to Change Price of another Good.
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If Exy is postive? (Exy>0)
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Substitutes
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if Exy is negative (Exy>0)
answer
complements
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If Exy equal 0
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Unrelated or independent
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Income elasticity of demand (formula)
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Ei = % change in quantity demanded / % change in income
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What is income elasticity of demand?
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The responsiveness of demand to a change in income
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If Ei is positive? (Ei>0)
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Normal Good
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If Ei is negative? (Ei<0)
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Inferior Good
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What is production cost?
answer
all the direct and indirect costs to produce a product
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Formula to find profit?
answer
Profit= total revenue - total cost
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What is explicit cost?
answer
out of pocket cost (taxes, rent, wages, etc)
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What is implicit cost?
answer
opportunity cost (lost wages, what you could have gained)
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Accounting Profit formula
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total revenue - explicit costs
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Economic profit formula
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total revenue - explicit costs - implicit costs
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What is normal profit?
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the minimum profit necessary to keep a firm in operation
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What is short run?
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At least one input is FIXED (usually capital)
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What is long run?
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Variable (Can change any input; including capital)
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What is marginal product of labor?
answer
the increase in the amount of production (output) from an additional unit of labor
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marginal product of labor formula
answer
MPL=(change in Q)/(change in L)
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Average product of labor formula
answer
APL = Q/L
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law of diminishing returns
answer
the principle that, at some point, adding more of a variable input, such as labor, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline
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