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