Term
|
Definition
It determines how much output a firm can get from any combination of inputs F(K,L)=Q |
|
|
Term
|
Definition
help organize production information by identifying all input combinations that generate the same output |
|
|
Term
|
Definition
measure the rate of change in production with respect to a change in a single factor |
|
|
Term
Marginal Rate of Technical Substitution |
|
Definition
measures the rate of change at which a firm would be willing to give up one input for another input so that total output does not change |
|
|
Term
|
Definition
- describe the cost trade-offs associated with each possible budget level
- it is all the budget allocations that cost the same
|
|
|
Term
|
Definition
|
|
Term
|
Definition
using the lowsest cost technologically efficient combination |
|
|
Term
|
Definition
describes input combinations for which the last dollar spent on each good increases utility by the same amount MU1/P1=MU2/P2 |
|
|
Term
|
Definition
a change in relative factor prices creates an incentive for firms to substitute away from the factor that has become relatively more expensive |
|
|
Term
|
Definition
are forward looking costs Economic cost=accounting cost+ opportunity cost-sunk cost |
|
|
Term
|
Definition
the set of all affordable bundles whose cost equals income I= p1q1+p2q2 |
|
|
Term
|
Definition
ratio of one product's price to another to measure how expensive that good is relative to the other good |
|
|
Term
|
Definition
a way of measuring benefit of any combination of goods - a systm of quantifying the benefits one gets from a bundle of choices
- it is a system to ran alternative bundles
U(q1,q2)= |
|
|
Term
|
Definition
organizes information about different combinations of goods that give the same benefit - are the curves that compare benefit
- each point on the curve the benefit is the same (hence the name "indfference curves")
|
|
|
Term
|
Definition
measure the rate of change in utility with respect to a change in how much we have of just one good |
|
|
Term
Marginal Rate of Substitution |
|
Definition
measures the rate at which a consumer would trade one good for another to keep utlity constant |
|
|
Term
|
Definition
describes the combination of goods in whuch the last dollar spent on each good increases utlity by the same amount |
|
|
Term
|
Definition
is the consumer's response to a change in real income |
|
|
Term
|
Definition
is the consumer response to change in relative prices |
|
|
Term
|
Definition
is what a firm gets after everyone else is satisfied Economic Profit= Revenue-Economic Cost |
|
|
Term
|
Definition
- many buyers and sellers without market influence or power
- all products are identical (homogeneous products)
- free entry and exit of firms
- perfect information
|
|
|
Term
|
Definition
The total cost of producing a certain amount of goods over the amount of goods produced |
|
|
Term
|
Definition
is the variable cost of producing an amount of goods divided by the amount of goods produced |
|
|
Term
|
Definition
the rate of change of a cost function with respect to a change in a single factor of production |
|
|
Term
|
Definition
average ouptput over units of input |
|
|
Term
|
Definition
are costs already incurred that cannot be recovered |
|
|
Term
|
Definition
are costs that you will incur but are independent of the use of an output |
|
|
Term
|
Definition
are costs that vary with the use of an input |
|
|
Term
|
Definition
is the highest price that a buyer is willing to spend to buy an extra unit of a good or service |
|
|
Term
|
Definition
is the amount of a good or service that buyer are willing to buy at a given price |
|
|
Term
|
Definition
When the price of one good goes up the demand for its substitute increases. Exp. hondas and toyotas |
|
|
Term
|
Definition
is the price at which the quantity supplied equals the quantity demanded |
|
|
Term
|
Definition
is the gains from trade that accrue to sellers |
|
|
Term
|
Definition
is the gains from trade that accrue to buyers |
|
|
Term
|
Definition
is the net loast gains from trade caused by market inefficency |
|
|
Term
|
Definition
is a tax that is the legal responsibility of sellers to pay |
|
|
Term
|
Definition
is a tax that is the legal responsibility of buyers to pay |
|
|
Term
|
Definition
An allocation is pareto efficient if there is no other allocation that makes some better off without making others worse off |
|
|
Term
|
Definition
- is a cost or benefit arising from a private activity that falls on others
|
|
|
Term
|
Definition
a good is rival if one person's consumption of the good restricts anyone else's consumption of the same good |
|
|
Term
|
Definition
a good is nonrival if one person's consumption of the good does restrict anyone else's consumption of the same good |
|
|
Term
|
Definition
a good is excludable if you can control who benefits from consuming the good |
|
|
Term
|
Definition
a good is nonexcludable if no one can be excluded from benefitin from the good once it is produced exp. public radio |
|
|
Term
|
Definition
Are goods that are nonexcludable to some degree Examples: - defense
- public school
- parks
- neighborhood pool
- public television
|
|
|
Term
|
Definition
Commons are public rival goods. (This means they are somewhat nonexcludable and rival) |
|
|
Term
|
Definition
People who have incentive to pay less than their marginal value (others pay for the public good, so you don't have to) |
|
|
Term
|
Definition
refers to the overuse of a common good or resource (The each use of a common public good reduces the amount that others can use and derive benefit from it) |
|
|
Term
|
Definition
|
|
Term
|
Definition
|
|
Term
|
Definition
- They have a decreasing average cost
- there are efficency gains by using less resources, but they have less incentive to innovate
What should be done to these types of monopolies? They should be regulated. The Demsetz Competition is usually used to regulate them.
|
|
|
Term
Production Possibility Frontier |
|
Definition
describes the set of goods and services an economy can produce efficiently |
|
|
Term
|
Definition
the value of the best possible alternative when a decision or choice is made |
|
|
Term
|
Definition
opportunity cost of increasing production of a good by one unit |
|
|
Term
|
Definition
A country has a comparative advantage of producing if it has the lowest marginal cost of production. Countries tend to have the comparative advantage in producing good in which they have a large endowment of the intensive inputs of production. |
|
|
Term
|
Definition
in producing a good if it can produce a product using fewer resources than the other country |
|
|
Term
|
Definition
refers to the amount an exported product a coutry pays for imported products. It is measured by the ratio of the amount of the exported product to the amount of the imported product. |
|
|
Term
|
Definition
the relationship between the quantity of a good consumers are willing to buy and the price of the good |
|
|
Term
|
Definition
the relationship between the price of a good and the quantity consumers are willing to buy |
|
|
Term
|
Definition
the determinants of demand are income (normal vs. inferior), relative price of other goods (substitutes and complements), and preferences |
|
|
Term
|
Definition
demand changes in the same direction as income |
|
|
Term
|
Definition
demand changes in the opposite direction as income |
|
|
Term
|
Definition
when the price of one complement goes up the demand for the complement goes down exp. hamburger patties and buns |
|
|
Term
|
Definition
the relationship between the quantity of a good producers are willing to sell and its price |
|
|
Term
|
Definition
the relationship betweem the price of a good and quantity producers are willing to sell |
|
|
Term
|
Definition
the amount of a good producers are willing to sell at a specific price |
|
|
Term
|
Definition
input prices, technology, and the number of firms in the market |
|
|
Term
|
Definition
If, - all traders have minimal market power,
- all goods and services can be traded in a market, and
- no one is uncertain about his/her valuation of each good and service
Then, every market equilibrium allocation is pareto efficient. (all market equilibria maximize the sume of CS and PS) |
|
|
Term
|
Definition
Under the same conditions as the First Welfare Theorem - every pareto efficient allocation can be achieved through market equilibrium
- given the proper redistribution of resources prior to trade
There is a legitimate role of government to increase social well-being, welfare, and wealth.
|
|
|
Term
|
Definition
an imposed limit on how high a price can go (a price cannot exceed a certain price) |
|
|
Term
|
Definition
a minimum price a good can go to in a given market (a good/service cannot be lower than a certain level) |
|
|
Term
|
Definition
are restrictions on the amount of a good or service that is traded in a market acts the same way that a floor does |
|
|
Term
|
Definition
is who has legal resposibilty for paying a tax |
|
|
Term
|
Definition
is determined by price sensitivity of buyers and sellers in a market. It is independent of the legal incidence. It is how the tax burden is distributed amongst buyers and sellers. |
|
|
Term
|
Definition
tells the relationship between change in firms' prices and change in revenue. It depends on if you are at an elastic or inelastic point on the demand curve. |
|
|
Term
Price Elasticity of Demand
|
|
Definition
|
|
Term
Price Elasticity of Supply |
|
Definition
|
|