Econ

Law of Supply

As the price of a good or service goes up, then the quantity of goods or services that suppliers offer will go up.

Opportunity cost of X in terms of y

How much of y one must forego for one unit of X

Opportunity Cost of X in terms of Y

OCx in terms of y: How many units of y I need to forego in order to obtain more units of X

Budget Constraint`

Represents the combination of goods and services that a consumer may purchase within their given income

Price Floor

Set above the equilibrium price. The floor keeps the equilibrium from going too low and maintain a relative balance. The lowest price a seller is allowed to charge for a product or service. Prevents price from going too low.

Short Run and Long Run in Production

Short Run Production is a certain period of time where capital is fixed and labor is flexible, while in long run, both variables are flexible

Isocost

Shows the combination of inputs which cost the same amount. ( Keeping the same total cost)

Production Function

Simply states the quantity of output (Q) that a firm can produce as a function of the quantity of inputs to production.

Marginal Rate of Substitution of X in terms of y

The amount of x you can give up wen you add 1 unit, while maintaining utility constant.

Cross Price Elasticity of demand

Measures the responsiveness of Qx demanded to a unitary change in Py, in % term.

Average Labor Productivity

A measure of economic growth of a country. Measures the amount of goods and services produced by one hour of labor. GDP

Perfect Substitutes in Consumption

Goods are substitutable one with the other completely.

Fixed Cost

A cost that doesn't change with an increase or decrease in the amount of goods or services produced.

Unitary Price Elasticity of Demand

A form of elasticity where goods have no effect in demand even when prices change. A good is unitary elastic when ^P=_|_TR

Complement

A good or service that is used in conjunction with another good or service. Something is considered a compliment when it shares a beneficial relationship with another product offering.

Rational Economic Choice

A principle that assumes individuals always makes prudent and logical decisions that provide them with the greatest benefit/ satisfaction, and decision is made in highest sense of self interest.

Long- Run in Production

Both Capital and Labor Flexible. These are categorically no fixed proportions in Long- Run production

Total Cost

C+K ( Cost of both

Cardinal Utility

Cardinal Utility is the idea that economic welfare can be directly observable. For example, people may be able to express the utility that consumption gives for certain goods.

Cardinal Utility

Concept of utility susceptible of quantitative measurement ( measured in "util"

Production Possibility Frontier

Displays which outcomes are feasible and not feasible

Increasing Returns to Scale

Efficiency increases as size of production increases ( Qo-->1, Q1-->8).

Constant Return to Scale

Efficiency of production DOES NOT DEPEND on the scale of production ( if Ko-->K1 results in the ultimate outcome of Qo-->Q1, double=CRS).

Utility Maximization Condition for Imperfect Substitutes

Find the combination of goods on the budget constraint that lies on the highest indifference curve.

Marginal Cost

In economics, marginal cost is the change in the total cost that arises when the quantity produced has an increment by unit. Cost of producing one more unit of a good.

Price Elasticity of demand

is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price, ceteris paribus.

Total Product of Labor

is defined as the the total quantity of output produced by a firm in the given inputs. Total product identifies the specific outputs which are possible using variable levels of counts.

Inferior Goods-->

A type of goods for which demand declines as the level of income or real GDP in the economy increases. A consumer would demand an inferior good less is they had a higher level of income.

Price ration

A valuation ratio of a company's current share price compared to its per-share earnings. A high price ration means investors are anticipating future high growth. No price ratio for companies losing money.

opportunity cost

What a person sacrifices when they choose one option over another ( influenced in every decision)....2 alternatives within a finite resource

Fixed Proportions in production (Perfect complements in Production)

When inputs are used in fixed proportions

Variable Cost

are those costs that vary depending on a company's production volume; they rise as production increases and fall as production decreases. This differ from fixed costs such as rent, advertising, which tend to remain the same regardless of production output.

Normal Good

where there is an increase in demand along with an increase in te income level. Also can define a normal good by calculating the income elasticity of demand. If the answer is positive and lower than 1-> then a normal good

Imperfect Substitutes

you need at least some of both goods to have any positive level of utility ( possible to substitute between them, but not completely).

Income elasticity of demand

A measure of the relationship between a change in the quantity demand for a particular good and a change in real income. %change in quantity demanded/ % change in income

Long Run Perfectly Competitive Equilibrium

Long Run at its greatest possible level.

Indifference Curve

All the combinations of goods that keep the consumer "indifferent", i.e. that give the consumer a constant level of satisfaction (utility).

Cost Minimization Problem

Find the combination of inputs on the tangent isoquart that lies on the lowest isocost...The goal is to find the way to incur the lowest opportunity cost in the pursuit of a given activity.

Substitutes

For a product to be a substitute with another good, it must share a relationship with that good. When a goods price goes up , the demand for its substitute will increase because consumers will be searching for a cheaper alternative. Conversely if a goods price goes down, then the demand for that substitute will go down because the consumer wil more efficiently retain the original good.

Law of Demand

Given income when the prices of other goods/tastes/services goes up, then the quantity demanded of that good goes down.

Perfect Complements

Goods consumed together in fixed proportions. A good that must be consumed with another good.

Income elasticity of demand

In economics, income elasticity of demand measures the responsiveness of the demand for a good to a change in the income of the people demanding the good, ceteris paribus. It is calculated as the ratio of the percentage change in demand to the percentage change in income.

Marginal Productivity of Labor

Is the change in output that results from employing an added unit of labor.

Optimal Bundle in Consumption

Is the consumption bundle that maximizes a consumers total utility given his or her budget constraint.

Market Structures

Is the number of firms producing identical projects which are homogeneous

Market Equilibrium

Market equilibrium is a market state where the supply in the market is equal to the demand in the market. The equilibrium price is the price of a good or service when the supply of it is equal to the demand for it in the market.

Perfect Substitutes in Production

One input can be substituted for the other at a constant rate. One full unit of production ( of a good) can be produced in fixed proportions in any sequence to equal 1 unit of Q.

Ordinal Utility

Ordinal Utility: Concept of utility that is not susceptible to quantitative measurements

Perfect Complements in consumption

Perfect Complements are goods that are consumed in fixed proportions, like glasses. Always two lenses to one frame, even if you have three lenses and 2 frames, you'll still only have 1 pair of glasses.

Inefficiency of Monopoly

Prices will tend to be higher and output lower, than what would exist in a market with low barrier s to entry. Prices will increases than both marginal costs and average total cost.

Average Cost

Production cost per unit of output, computed by dividing the total of fixed costs and variable costs by the number of total units produced (total output). Lower average costs are a potent competitive advantage.

Relative Price of X in terms of y

Px/Py is a ration of two prices--->the price of one good in terms of another, a ration. *Amount of y you must forego in order to obtain 1 more unit of x.

Isocost

The isocost analyzes the producers behavior. The isocost line illustrates the possible combination of two factors that are used at given costs for a given producers budget. Look at the isoquant to the find the combination of goods.

Isoquant

The isoquant curve helps firms adjust to their inputs to maximize output and profit. A curve of all the possible combinations of inputs that result in the production of a given level of output

Price Celing

The maximum price a seller is allowed to charge for a product or service. Are set by law and limits the sller to ensure reasonable business. Determined by S/D.

Marginal Rate of Substitution

The negative of the slope of the indifference curve. MRS at U- Constant =>Represents the possible combinations that can result in satisfaction. ( Change in y divided by change in x).

Market Disequilibrium

The state of the market that exists when the opposing forces of demand and supply do achieve a balance and there is an inherent tendency for change. Market disequilibrium results if the market is not in equilibrium. Which means in the demand price is not equal to the supply price and the quantity demanded is not equal to the quantity supplied.

Ceteris Paribus

This term indicates the effect of one variable on another, holding all other things constant that may affect that one variable.

Cost Minimization Condition with Imperfect Substitutes

This would occur when the slope of the isoquart= the isocort.

Golden Rule of Profit Maximization in perfect competition

To maximize profit ( or minimize loss) a firm should produce the output at which Mr=MC

Average Fixed Cost

Total fixed cost divided by number of units of production (total product).

Total Revenue

Total revenue is the total receipts of a firm from the sale of any given quantity of a product. It can be calculated as the selling price of the firm's product times the quantity sold, i.e. total revenue = price × quantity, or letting TR be the total revenue function: (P*Q).

Decreasing Returns to Scale

efficiency of production decreases as the size of production increases.

Marginal Rate of Technical Substitution

is the slope of the isoquant. The rate at which one factor has to be decreased in order to retain the same level or productivity if another factor is increased.