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