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Micro Exam 2
n/a
40
Economics
Undergraduate 1
04/19/2009

Additional Economics Flashcards

 


 

Cards

Term
Classicals
Definition
The amount of labor embodied in the goods (labor theory of value)
Term
Marginal Utility
Definition
Extra satisfaction from the extra consumption
Term
When consumption increases what happens to marginal utility
Definition
Marginal utility decreases
Term
When the consumption goes down, what happens to the Marginal utility?
Definition
It goes up
Term
Set of assumption...about consumption...i think(there are 3)
Definition

1. individuals are rational, selfish, utility maximizers and individuals are never satisfied

2. human beings have certain/given income that they can allocate for the consumtion of goods

3. given the process in the market p1 and p2 individuals choose q1 and q2 (price takers)

Term

On the graph, where is the consumer surplus located?

And at what point do we consume?

Definition
it is the shaded area under the curve, below the marginal utility and and above the price
Term
Marginal Rate of Substitution
Definition
Willingness to give up one good for another, while keeping the same level of total utility
Term
What does the slope of a budget constraint show?
Definition

The trade-off between g1 and g2, giving p1 and p2

the opportunity cost of giving up goods

Term
Bliss point
Definition
Where the MRS meets the -p1/p2
Term

True or False?

All the points on the Demand Curve are points of utility maximization or bliss points.

Definition
True
Term
What happens when an individual chooses to consume more?
Definition
Their income increases
Term
What is elasticity?
Definition
The measure of responsiveness
Term
How do you calculate the price elasticity of demand?
Definition

i. % change Q/% change P

 

ii. (change Q/avg Q)/(change P/avg P)

 

iii. P/Q x 1/slope

Term
Price elastic
Definition
When Ep is greater than 1
Term
Unit Elastic
Definition
When Ep is equal to 1
Term
Price inelastic
Definition
When Ep is less than 1
Term
What are the determinents of price elasticity of demand?
Definition

1. the nature of the good

2. availability of close subsitutes

3. share of the consumer's budget

4. time

Term

Are normal goods more income elastic or more income inelastics?

What about inferior goods?

Definition

Normal goods are more income inelastic

Inferior goods are more income elastic

Term
What are the sources of income?
Definition

1. land (rent)

 

2. labor (wages)

 

3. capital (interest rate)

 

4. entrepreneurship (profits)

Term
What is Marginal Physical Product?
Definition

The increase in output that results from a unit increase in the amount used of an input-holding the amount of other inputs constant

 

MPP= change g/change in hL

Term
Marginal Revenue Product (MRP)
Definition

The money value of the extra production from the extra unit of an input

 

MRP=MPPxPg

Term
What is the wage rate?
Definition
The price of labor
Term

1.Profits equal ______ minus _________.

 

2.Total Profits equal _______ minus ________.

Definition

1. revenues- costs

 

2. total revenues- total costs

Term
Supply of funds
Definition
Individuals, banks, intstitutions that lend funds out
Term
Profits
Definition
Residual/ difference between revenues and costs
Term
Economic Profits
Definition
Total revenue of the firm minus all of its costs including the interest rate and the opportunity cost capital that it obtains from its investors
Term
In the long run, profits are equal to the _______ ____ and the ______ _____ are zero
Definition

1. interest rate

 

2. economic profits

Term
In the short run, firms can make more than _____ ___, more than other _____ make
Definition

1. interest rate

 

2. firms

Term
What is the goal in the demand of labor?
Definition
Profit maximization
Term
Marginal profits equation
Definition
change in profits/ change in hL
Term
Subsitiution effect
Definition

A wage increase is the resulting incentive to work more because of higher reward to labor

 

when the wage rate goes up, the price of leisure goes up (opportunity of leisure)

Term

 

Income effect

Definition
The resulting rise rise fo workers purchasing power that enables them to consume more leisure
Term
The supply of labor depends on the strength of the ________ and the _______ ________.
Definition

1. substitution

 

2. income effects

Term

What equals income?

(there are four things)

Definition

1. wages

2. interest rate

3. rent

4. profit

Term
Cost of production in the S-R
Definition

- in the S-R, k is fixed

 

- in the S-R firms have a fixed cost, the cost of capital --> r x k

Term
Marginal cost
Definition
extra cost of an extra unit of output
Term

Perfect Competition

(four points)

Definition

i. firms produce and sell identical goods (perfect substitutes)

ii. firms are small compared to the mkt and can sell as many goods as it wants (the firm) as long as it changes the mkt price (price takers)

iii. perfect information

iv. free entry and exit from the mkt

Term
What is MR D AR P?
Definition
Marginal revenue, demand, average revenue, and price
Term
The firm will produce q at which the firm has max profits...what is this point?
Definition
Where P=MC
Term
Total Revenue is equal to ______ x ______.
Definition
1. price x quantity
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