Econ test 2
income elasticity of demand
% change in quantity demanded divided by % change in income
cross-price elasticity of demand
a measure of responsiveness of quantity of one good purchased to a change in the price of another good
income elasticity of demand
a measure of responsiveness of quantity purchased to a change in income
Price elasticity of demand
a measure of the responsiveness of the quantity demanded of a good to a change in the price of that good
price elasticity of supply
a measure of the responsiveness of the quantity supplied of a good to a change in the price of that good
law of diminishing marginal utility
as more quantity of a good is consumed over a giver time period, total utility increase by a decreasing amount
variable inputs are defines as any resource that
can be changed as output changes
Marginal physical product
change in total output that results from employment of one additional unit of input, holding other inputs constant
If the percentage change in the quantity demanded of a good is less than the percentage change in price, price elasticity of demand is elastic
false
if marginal utility is positive then the total utility must be falling
false
complementary goods
goods frequently consumed in combination; when the price of good x rises, the demand for good y decreases
substitute goods
goods that can replace each other; when the price of good x rises, the demand for good y increases, and vice versa
a completely elastic demand curve has an elasticity coefficient of
infinity
variable inputs
inputs the manager can adjust to alter production
fixed inputs
inputs the manager cannot adjust in the short run
the additional please or satisfaction from a good declines as more of it is consumed in a given period
law of diminishing marginal utility
the law of diminishing returns states that beyond some point, the
marginal physical product of a variable input diminishes as more of that input is used
utility maximization rule
marginal utility per dollar spend on all goods must equal and total expenditure must equal total income
a consumer maximizes total utility from a given amount of income when the
marginal utility per dollar spent on each good is the same
law of demand
quantity demanded will increase when the price is lowered and vice versa
utility refers to the
satisfaction obtained from a good or service
the period in which at least one input is fixed in quantity is the
short run
production function
shows the maximum quantity of a good attainable from different combinations of factor inputs
four factors determine an individual demand for a product
tastes, income, expectations, other goods
marginal utility for a good is computed as
the change in total utility divided by the change in quantity
marginal utility
the change in total utility obtained by consuming one additional unit of a product
joe goes to an all you can eat buffet at a chinese restaurant and consumes three plates of food. he does not go back for a fourth plate of food because
the marginal utility of the fourth plate would be zero or even negative
optimal consumption
the mix of consumer purchases that maximized the utility attainable from available income
utility
the pleasure or satisfaction obtained from using a good or service
Which of the following best describes a production function
the relationship between the maximum amounts of output a firm can produce and various quantities of inputs
short run
the time frame in which there are fixed factors of production
long run
the time horizon over which all inputs are variable
total utility
the total amount of satisfaction obtained from the consumption of a series of products
total physical product
total output by using units of inputs
when the marginal physical product of labor is positive then total output must be increased
true
suppose the pleasant corporation cuts the price of its american girl dolls by 10 percent and as a result, the quantity of the dolls sold increases by 25 percent. This indicates that the price elasticity of demand for the dolls oftthis range is
2.5
If the price elasticity of demand for football tickets is estimated to be 4.5 then a 10 percent increase in football ticket prices would be expected to cause a:
45 percent decrease in quantity demanded
The price elasticity of demand for gasoline measures:
Responsiveness of customers to changes in the price of gasoline