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As average increases...
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Marginal is greater than average
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As average decreases...
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Marginal is less than average
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Marginal product of labor is inversely related to...
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Marginal cost
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Average product of labor is inversely related to...
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Average variable cost
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Total product rate is inversely related to...
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Total cost and variable cost (only the rates because they always increase)
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The first derivative of total product is...
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Marginal product of labor
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The second derivative of total product is...
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the first derivative of marginal product of labor
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The compensated budget line is...
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parallel to the second budget line
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Substitution effect is...
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A→B
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Income effect is...
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B→C
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Total effect is...
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A→C
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Income effect can be found using...
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what category of good it is, engel curve, ICC, or TE
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ICC tells you...
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IE
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Engel curve tells you...
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IE for single good
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PCC tells you...
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TE
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Demand curve tells you...
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TE for good
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If the rays are getting flatter they are...
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decreasing
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If the rays are getting steeper they are...
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increasing
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If the total product starts on the y-axis...
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then variable cost will start on the x-axis (assume at same point)
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In the short-run, marginal cost is equal to...
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the first derivative of variable cost
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Expansion path
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An expansion path shows all of the cost-minimizing combinations of labor and capital as the quantity of production varies, holding constant the prices of labor and capital
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Labor demand function
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A labor demand function shows all of the cost-minimizing levels of ONLY labor as the price of labor changes, holding constant the quantity of production and price of capital
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Capital demand function
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A capital demand function shows all of the cost-minimizing levels of ONLY capital as the price of capital changes, holding constant the quantity of production and the price of labor
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Total cost function
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A total cost function shows all of the cost-minimizing combinations of labor and capital as the quantity of production varies, it shows what happens to the minimum cost as the level of production changes
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Long-run total cost function
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The LRTC function shows the relationship between the total cost, the price of labor, the price of capital, and the quantity of production
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Long-run total cost curve
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The LRTC curve shows how the minimum cost of production varies with the quantity of production, holding constant the prices of labor and capital
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Isocost function
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The isocost function shows the relationship between the total cost and the price of labor, the price of capital, and the levels of inputs
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MRTS
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MPL/MPK
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Low elasticity of substitution implies...
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inelastic demand for labor
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High elasticity of substitution implies...
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elastic demand for labor
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AVC
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VC/Q
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ATC
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TC/Q
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MC
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dVC/dQ
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APL
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Q/L
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Flatter isoquant or IC curve means...
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the person prefers Y to X
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Steeper isoquant or IC curve means...
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the person prefers X to Y
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Elasticity of Substitution
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The elasticity of substitution measures how the marginal rate of technical substitution of labor for capital changes as we move along an isoquant. Essentially this value tells us the level of substitutability between capital and labor, i.e., how easily the firm can substitute capital for labor to maintain the same level of total output
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Monotonic transformation
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...
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Always check for corners
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...
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MRT>MRS
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All Y
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MRS>MRT
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All X
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Same face means...
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Downward sloping (bad & bad/good & good)
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Different face means...
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Upward sloping (good & bad)
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ΔX/ΔY is equal to...
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MUy/MUx which is also equal to Py/Px
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Steeper means...
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greater
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Flatter means...
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less
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MUx/MUy=5/2 can be interpreted as...
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The person is willing to give up 5/2 of clothing for one food
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Cobb Douglas function ICC looks like what?
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Upward sloping
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Cobb Douglas function PCC looks like what?
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Horizontal
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Cobb Douglas function engel curve looks like what?
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Upward sloping
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Elasticity of demand
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(dX/dPx)*(Px/X)
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Cross-price elasticity of demand
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(dX/dPy)*(Py/X)
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Income elasticity of demand
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(dX/dI)*(I/X)
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When an equation looks like Q=L+K^1/2 then its expansion will be...
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A horizontal line
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Will it ever cost more in the long run compared to the short run?
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NO
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