Term
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Definition
Time period in which firms cannot adjust any of their inputs; all
inputs a re fixed; the firm can only produce with the resources on hand |
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Term
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Definition
Time period in which the firm can vary several inputs, but at least one
input remains fixed. Generally labor is assumed to be variable and capital is assumed
to be fixed. |
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Term
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Definition
Time period in which all inputs can be varied. The firm can now adjust
capital. |
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Term
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Definition
Mathematical relationship between inputs and outputs; it indicates the
maximum number of units that can be produced from a given set of inputs. |
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Term
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Definition
| the total number of units produced |
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Term
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Definition
the additional output that is produced from an additional unit of the
variable input. In most circumstances this refers to the marginal product of labor, what happens
to Q when one more worker is hired.
MP = ∆Q/∆L |
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Term
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Definition
| the number of units produced per worker |
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Term
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Definition
| 1) Increasing returns,2) Diminishing returns, 3) Negative returns |
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Term
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Definition
| is the want satisfying characteristic of goods and services |
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Term
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Definition
this type of utility rank orders a person’s preferences
For example:
Cap’n Crunch > Rice Krispies > Cheerios |
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Term
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Definition
this type of utility assumes that utility can be measured
numerically |
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Term
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Definition
the extra; the increment; the additional; what has been added to the total;
Slope |
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Term
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Definition
the additional satisfaction received by the consumer from consuming
an additional unit of the good or service
MU = ∆TU/∆Q |
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Term
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Definition
total satisfaction accumulated from the consumption of a single or
multiple
units of a good or service
TU = ΣMU |
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Term
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Definition
curve indicating all the possible combinations of 2 goods that can be
purchased if all income is spent, given the prices of the two goods. |
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Term
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Definition
curve indicating all combinations of 2 goods that give the
consumer the same level of utility, that is, total utility is constant along this curve |
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Term
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Definition
Elasticity = 1 unitary
Elasticity > 1 elastic
Elasticity < 1 inelastic
Elasticity = 0 perfectly inelastic, vertical demand curve
Elasticity = infinity, perfectly elastic, horizontal demand |
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Term
| Relationship to total revenue (expenditures) |
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Definition
Elastic P increase causes TR to decrease
Inelastic P increase causes TR to increase
Unitary P increase causes no change in TR |
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Term
| Straight line demand curve and Ep |
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Definition
Top half—elastic
Midpoint – unitary
Bottom half- inelastic |
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Term
| Demand is more elastic when: |
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Definition
There are a large number of substitutes
The consumer spends a large % of their income on the good
The good is a luxury compared to being a necessity
The longer the time frame |
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Term
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Definition
Ey > 0 normal
Ey < 0 inferior
Ey = 0 necessity
Ey > 1 luxury (positive sign only) |
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Term
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Definition
Ea,b > 0 then the goods are substitutes
Ea,b < 0 then the goods are complements |
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Term
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Definition
If demand is relatively inelastic (compared to supply) then consumers pay the larger portion of an increase in
excise taxes. If supply is relatively inelastic (compared to demand) then producers pay the larger portion of an
increase in excise taxes |
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Term
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Definition
– The benefit or welfare gained by consumers from only having to
pay the equilibrium price for the good and not having to pay the highest price you were
willing to pay (reservation price, read from the demand curve). |
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Term
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Definition
The benefit or welfare gained by producers from receiving the
equilibrium price for the good and not having to accept the lowest price consumers are
willing to pay (reservation price, read from the demand curve |
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Term
Relations between Total benefit and
Marginal benefit |
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Definition
• TB = S MB
• MB = DTB/DQ
• If MB > 0 then TB rises
• If MB = 0 then TB is maximized
• If MB < 0 then TB falls
• Slope of TB = MB =DY/DX = DTB/DQ |
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Term
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Definition
One person’s consumption of the
good denies anyone else from consuming
that item (over a fixed time period) |
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Term
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Definition
Goods that can be consumed
simultaneously by more than one person
without hindering the ability of each to
consume |
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Term
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Definition
These are goods which have
barriers to be overcome or criteria that must
be met in order for someone to have access
to obtain the good |
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Term
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Definition
These are goods that
everyone has access to and there are no
criteria to be met for one to consume |
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Term
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Definition
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Term
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Definition
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Term
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Definition
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Term
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Definition
Non-excludable
„ Non-rival |
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Term
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Definition
imposes costs on some
one who is neither the
consumer nor the
producer of the good. |
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Term
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Definition
provide benefits to
people who are neither
the producer nor the
consumer of the good. |
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