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Consumer's Burden from a Tax
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share of the government's revenue that's due to the higher price to consumers
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Producer's Burden from a Tax
answer
share of the government's revenue of a tax that is due to a lower price for producers
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Consumer's Benefit from a Subsidy
answer
share of the government's expenditures on a subsidy that is due to lower price to consumers
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Producer's Benefit from a Subsidy
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share of the government expenditures on a subsidy that is due to a higher price to producers
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Price elasticity of demand
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measures the percent change in the quantity demanded from a given percent change in the price of a good
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Elastic demand
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the percent change in quantity is greater than the percent change in price
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Perfectly Elastic demand
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Demand = infinity, demand curve is a horizontal line. This means that if price is increased by one cent, demand will fall to zero.
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Inelastic demand
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the percent change in quantity is less than the percent change in price
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Perfectly Inelastic Demand
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demand = zero. This means that any change in price will have no effect on demand. Demand curve is vertical.
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Unit elastic demand
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the percent change in quantity is equal to the percent change in price
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Total Revenue
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price times quantity (P*Q) (or) total amount of income that a company brings in from selling a product/service
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Income Elasticity
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shows the percent change in the demand for a good from a given percent change in the consumer's income
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Cross Price Elasticity
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shows the percent change in the demand for one good from a given percent change i the price of another good
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Elasticity of Supply
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percent change in the quantity supplied from a given percent change of the price of a good
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Thomas Malthus
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inventor of diminishing marginal productivity
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Law of diminishing marginal product
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the idea that as you add increasing amounts of one input to fixed amounts of another, eventually your increases in output occur at a decreasing rate
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Production Function
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mathematical relationship showing the varying amounts of output that can be produced using varying inputs and the available technology
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Total Product Curve
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graphical depiction of the production function
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Marginal Product
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additional output from using one more of a variable input
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Average product
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Q/L
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Variable Input
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input whose use can be changed in the short run
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Fixed Input
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input whose use cannot be changed in the short-run
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Implicit Costs
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costs that do not involve a transfer of money
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Explicit Costs
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costs that involve a monetary transaction
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Short-run
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the period of time when at least one input is fixed
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Long-run
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the period of time when all inputs are variable
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Profits
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TR minus TC
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Total Variable Costs
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costs of the variable inputs (cost per unit x # units of the input used)
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Total Fixed Costs
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costs of the fixed inputs (fixed cost per unit * # of units of the input used)
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Total Costs
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total cost of producing a given level of output (Fixed Costs + Variable Costs)
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Average Variable Costs
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what it costs on average in terms of variable inputs to produce each unit of output (TVC/Q)
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Average Fixed Costs
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what it costs on average in terms of fixed inputs to produce each unit of output (TFC/Q)
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Average Total Costs
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total cost/Q
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Marginal Costs
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additional costs from producing one more unit
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Marginal Revenue
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additional revenue from selling one more unit
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Total Revenue
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price times quantity
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Perfect Competition
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a market structure where firms are price takers, there are many buyers and sellers selling an identical product, and there is free entry and exit
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Price Taker
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somebody who has no ability to affect price through their behavior
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Shut-down point
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price when the losses from producing exactly equal the losses from not producing
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Firm's Supply Curve
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marginal cost above the minimum average variable cost
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Long Run Average Cost Curve
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outside envelope of all of the ATC curves using all possible combinations of inputs
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Increasing Returns to Scale
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a given percent change in the use of all inputs results in a greater percent change in the output
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Constant Returns to Scale
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a given percent change in the use of all inputs results in a equivalent percent change in the output
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Decreasing Returns to Scale
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a given percent change in the use of all inputs results in a smaller percent change in the output
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Increasing Cost Competitive Industry
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competitive industry where SLR is upward sloping
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Constant Cost Competitive Industry
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a competitive industry where the long run supply curve is horizontal
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Decreasing Cost Competitive Industry
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a competitive industry where the long run supply curve is downward sloping
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Monopoly
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a market structure in which there is one firm selling a unique product with high barriers to entry(legal, monetary, resources, etc)
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Barrier to Entry
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legal or technical reasons that prevent firms from entering a market
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