Microeconomics Chapter 1-8
Production Possibility Curve
-all points are possible -points on curve can be attained if all resources are used efficiently -inside curve is unemployment (attained without resources) -outside of curve is unattainable (scarcity)
What are real flows in the circle flow of income
Goods and services
What is the relationship between elasticity and total revenue
If the the product is elastic - increase revenue by decreasing price if inelastic - increase revenue by increasing price
Ceteris Paribus
Other things being equal
What is marginal utility
additional satisfaction obtained from consuming one additional unit of commodity
The law of demand
all other things being equal - as price increase, quantity demanded decrease as price decreases, quantity demanded increases
Law of diminishing marginal utility
any consumer derives from successive units of a particular product consumed over some time
Where is consumer surplus
area under the demand curve and above the price line
difference between binding and non binding
binding - set above equilibrium has affect on price non binding - set at or below equilibrium and doesn't affect price
What is a normative statement
can't be measured, what should be, value judgment
Scarcity causes...
choice, which causes opportunity cost (the next best thing)
Who benefits from rent controls
existing tenants
What is a production function
functional relation showing the max output that can be produced by any combination of inputs
What are normal goods
goods that quantity demanded rises as income rises
Marginal Cost
increase in total cost resulting from increasing output by 1 unit
What is the opportunity cost of money
not investing it (interest rates)
What is the cross price elasticity of substitutes
price increase of substitute leads to a increase in quantity demanded
What is utility
satisfaction that consumer gets from consuming goods or services
Define the runs
short run - quantity of some inputs cannot be increased beyond the fixed amount long run - inputs may be varied, existing technology cannot be changed very long run - technological possibilities can change
Economics
the use of scarce resources to satisfy unlimited human wants
Relationship between total and marginal utility
total - total satisfaction from given quantity marginal - satisfaction from consuming another quantity
Dead weight loss of price controls
wasted chance to create both producer and consumer surplus from those sales
Y is a function of X
when x is related to y, every value of x, there is only one possible value of Y
Concert Tickets
Creates a shortage - good for consumers
What are on the axes of a demand diagram
Quantity Demanded and price
What happens when you move along a production possibility curve
Reallocation - at capacity (producing the most with least amount of cost)
What is a curve that is unit elastic everywhere
Rectangular
