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NDSU ECON 201 - Definitions and economies

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ECON 201 1st Edition Lecture 6 Outline of Current Lecture I. DefinitionsII. What about the long run?Current LectureNormal good- if a person’s income increases they would buy more of this good- Bigger TV, expensive goods, DVDsInferior good- if a person’s income increases they would buy less of this product- Ramen noodles, mac and cheeseComplete market supply function- tells us the quantity of a good that producers would be willing and able to supply at all alternative market prices and all alternative market circumstances.Sx = f (Px, Ns, Pr, Tl, Es . . . )- Px = price - Ns = number of sellers - Pr = price of resources- Tl = level of technology - Es = expectations of suppliers - many more . . .Single market supply function- tells us the quantity of a good that producers would be willing and able to supply at all alternative market prices, c.p.Law of supply- there is a direct or positive relationship between the quantity of a good supplies and the price in the short runShort run- a period of time so short that the firm cannot change all inputs by the same proportion. (so short, we can change labor, but not capital)Long run- a period of time in which a firm could vary all of its inputs by the same proportionsLaw of diminishing returns- as we add more and more of a variable resource to a fixed set of inputs with a fixed technology, the resulting output will increase over the relevant range, but at a decreasing rateThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.Total physical product of labor- the total amount of a product produced during a given time period by laborMarginal physical product of labor- the extra physical product resulting from the addition of onemore unit of labor.What about the long run?Increasing returns to scale- when the firm doubles inputs the resulting output more than doublesConstant returns to scale- a doubling of inputs would result in a doubling of outputDecreasing returns to scale- when the firm doubles inputs the resulting output would be less than doubleEconomies of scale- reducing average cost per unit by increasing volume of


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