MGEA02 Intro to Microeconomics Midterm Review

The study of individual markets in the economy

Is the study of the allocations of scarce resources among competing uses

Implies constraint exists and trade-offs have to be made

is decisions by individuals about what to do, which necessarily involve decisions about what not to do

is anything that can be used to produce something else

Giving up one thing for another

decisions about whether to do a bit more or a bit less of an activity

the study of marginal decisions

Is anything that offers rewards to people to change their behaviour

When no individual would be better off doing something different

Illustrates the trade-offs facing an economy that produces only 2 goods. It shows the maximum quantity of 1 good that can be produced for any given quantity of the other

the ability to produce a good using fewer inputs than another producer

the second derivative is negative

Right

A set of institutional arrangements that bring buyers and sellers together to negotiate the terms for exchanging goods or services

Shows the behavior of buyers. Has a negative slope. Shows the MAXIMUM price customers are willing to pay 9 (per unit) for any particular quantity

Decreasing satisfaction or usefulness as additional units of a product are acquired

Behavior of sellers. In short run, has positive slope. Shows the MINIMUM price suppliers are willing to charge (per unit) for any particular quantuty

Increasing marginal cost of production rises as output increases

the cost of producing one more unit of a good

-many buyers and sellers
-product is homogeneous or standardized (no brand loyalty)
-perfect information (no one is fooled)
-Free entry and exit in LR

change in quantity demanded (due to own price)

change in other factors: # of buyers, income, price of related goods, tastes, expectations.

an increase or decrease in demand due to a SHIFT of the demand curve.

a replacement to a good (eg: butter/margarine)

two goods that are bought and used together (popcorm/cola)

change in quantity supplied (due to own price)

Price of labour, price of capital goods, changes in technology, excise tax

-shortages (excess demand)
-black market
-deterioration of properties

-excess supply (unemployment)
-illegal workers
-resources will not move to new occupations

Ability or capacity of a good or service to be useful and give satisfaction to someone.

derivative of utility function. second derivative is negative to show diminishing marginal utility

a measure of the responsiveness of quantity demanded or quantity supplied to a change in one of its determinants

-availability of close substitutes
-amount spent on this good by consumer
-cost of switching products
-degree of necessity or luxury and habitual consumptiom
-peak and off peak demand
-the breadth of definition of a good or service
-time period following price change

ED > 1

ED <1

ED = 1

a tax on the production or sale of a good

maximize their profits

the change in output from hiring one additional unit of labor

period too short for firms to change production capacity of existing technology

period long enough for firms to change plant capacity, and for new firms to enter or exit the industry (K can vary)

period long enough for technology to change (potentially)

When marginal product is increasing, marginal cost falls. When marginal product falls, marginal costs increase.