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Price Elasticity of Demand is
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percentage change in quantity of a good demanded divided by the percentage change in the price of that good.
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Demand is said to be elastic when the
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percentage change in quantity demanded is greater than the percentage change in the price of that good.
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Folgers and Maxwell House coffees tend to be much more price elastic than Starbucks brand coffee, As a result we can conclude,
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when the price of Folgers and Maxwell House rises, consumers will buy a lot less.
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If the amount of land supplied remains the same even when the price of land increases, the.
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supply of the land is perfectly inelastic
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If the percentage increase in the quantity supplied is greater than the percentage increase in the price, the supply:
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is elastic
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What is true about a downward sloping demand curve?
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The slope remains the same, but the elasticity falls as you move down the curve.
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A supply curve that intersects the horizontal (quantity) axis is:
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Inelastic
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A perfectly elastic supply curve would:
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be horizontal
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If the good is a necessity it would be?
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Inelastic
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If the demand for a good is Elastic, then
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it would most likely be considered for a long time interval
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If the minimum that the Smith family would be willing to sell their house for is $185,000, but they fact sell it for $210,000, they will receive?
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A producer surplus of $25,000
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Consumer surplus
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The distance between the demand curve and the price the consumer has to pay for a product.
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Producer Surplus
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The distance between the supply curve and the price the producer receives for the product for the given quantity supplied.
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If the supply curve is perfectly inelastic, the burden of tax on supplies is borne?
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Entirely by the supplier
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Self Interest
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The underlying psychological foundation of individual choice and economic reasoning.
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Marginal utility
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The consumption of an additional unit of a good provides additional satisfaction
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If total utility is increasing we know what about marginal utlitity
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it is positive
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When Marginal utility is zero, total utility is?
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at its maximum
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The Principle of diminishing marginal utility states
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marginal utility begins to fall at some point
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Given the price is constant, the lower the marginal utility of a good
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the less you are willing to buy of it
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Suppose Jane has chosen a combination of two goods, A and B, such that MU/P of good A is 10(MUa/Pa=10), and MU/P of good B si 10(MUb/pB=10.) To increase utility with the same amount of money, Jane would?
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do nothing, she can not increase utility with the same amount of money
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The forgone income that the owner of a business could have made by spending time working in another job is called?
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Opportunity Cost
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The reason economist and accountants have problems using cost analysis in the real world is that?
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although implicit cost do not show up in accounting profits, they nevertheless affect managerial decisions
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Short Run
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Period during which some inputs are variable and some inputs are fixed.
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Long Run
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Period during which no inputs can be varied, all inputs are fixed
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Marginal Product
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Increase in output obtained by hiring an additional worker
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When labor is the variable input, the average product equals?
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quantity of output divided by the number of workers
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The law of diminishing marginal productivity implies that the marginal product of a variable input?
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eventually declines
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Marginal Productivity eventually
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Decreases because some inputs are fixed
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What cost is independent of output?
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Fixed Cost
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Average Fixed Cost:
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decreases as output increases
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Economic Efficiency is achieved at a particular output level if
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average total cost is as low as possible
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Since capital is relatively scarce in India, the economically efficient method of producing food would be?
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not be capital intensive
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The law of diminishing marginal productivity does not apply in the long run because?
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no inputs are fixed in the long run
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Economies of Scale account for what part of a long run average cost curve?
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downward sloping
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Generally, as the size of a firm increases?
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monitoring cost increase
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Positive expected profits
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encourage people to supply goods
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