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ECON 101: FINAL
Scarcity |
There is not enough to meet demand. Demand greater than supply |
Opportunity Cost |
Something you give up for something else. |
Microeconomics |
About firms and individuals |
Production Possibilities Frontier |
Graph showing the combinations of things you can produce. |
Comparative Advantage |
making something more efficient (lower opportunity cost) |
Absolute Advantage |
Making more of something than someone else. |
Law of Demand |
When price goes up demand goes down, and when price goes down demand goes up |
Law of Supply |
Price goes up when demand goes up |
Market Equilibrium |
where supply and demand meet |
Price Ceiling |
The maximum someone can sell something at. (ceiling is below equilibrium) |
Price Floor |
The minimum someone can sell something at. (floor is above equilibrium) |
Excise Tax |
Tax on a specific good or service (alcohol tax) |
Tax Incidence |
how tax is distributed between buyers and sellers |
Subsidy |
opposite of a tax, government gives money when stuff is bought or sold |
Elasticity |
measures how much demand changes compared to how much price changes. (Quantity/Price) |
Cross Price Elasticity |
how much demand changes when the price of something else changes |
Inelastic Demand |
Values less than 1 |
Elastic Demand |
Values greater than 1 |
Unit Elastic Demand |
Values equal to 1 |
Substitute Good |
good in place of another good |
Normal Good |
Demand goes up when income goes up. |
Inferior good |
Demand goes up when income goes down. |
Compliment Good |
two things that go good together. |
Budget Constraint |
combination of things you can buy with your budget. |
Relative Price |
price of a good relative to another price |
Rational Preferences |
Logically consistent choices |
Utility |
satisfaction obtained using a good or service. |
Income Effect |
If income changes, buying habits will also change |
Firm |
business that makes things |
Long-run |
however long it would take to change cost. |
Short-run |
not enough time to change cost |
Variable Cost |
cost that change during production |
fixed Costs |
costs that stay the same. |
Total Cost |
Fixed cost+Variable Cost |
Marginal Production of Labor |
how much more stuff you make by employing one more worker. |
Explicit Cost |
direct payment to others |
Implicit Cost |
no money is being exchanged (just giving stuff up) |
Average Variable Cost |
Variable Cost ÷ Quantity |
Average Total Cost |
Total Cost ÷ Quantity |
Marginal Cost |
Change in total cost ÷ change in total quantity |
Profit |
revenue - cost |
Economic Profit |
revenue - implicit and explicit cost |
Total Revenue |
All of your revenue |
Marginal Revenue |
Change in revenue ÷ change in quantity |
Externality |
some cost or benefit that effects someone other than the producer or consumer. |
Tariff |
Tax on imports |
Protectionism |
protecting the goods here |
Marginal Utility |
Change in use of a good or service since the last thing you used. |
Positive Statement |
something that can be tested |
Normative Statement |
What should be. (an opinion) |
Direct Cost |
something you pay |
PPF Curve |
point on the line is attainable, a point inside the line is attainable but not efficient, and a point outside the line is unattainable. |
Shift Supply Curve |
substitute good (decrease), produce more efficiently (increase), more firms making that thing (increase). The willingness of a firm to make something at a certain price! |
Shift Demand Curve |
more people in the market, price of a good goes up, if people think prices will go down in the future they will buy less now. **The willingness of a consumer to buy something at a certain price** |
Surplus |
More supply than demand |
Shortage |
more demand than supply |
Effects Of Price Ceiling/Floor On Output Level |
consumption will go down |
Excise Tax On Supply And Demand |
tax on a specific thing. Shifts the demand curve left, and the supply curve will shift left. People are willing to buy less and producers are not producing as much. |
Elasticity equation |
% change quantity ÷ % change price |
Price Elasticity |
how much quantity demand changes when compared to a price change of a good. |
Income Elasticity |
how much people demand changes when their income changes. |
Diminishing Marginal Utility |
At some point in consumption satisfaction will decrease. |
Marginal Production |
How much more stuff you produce by having one more labor |
Diminishing Marginal Production |
Eventually you make less stuff per laborer |
Average Cost |
normal cost ÷ quantity |
Sunk Cost |
cost that you have paid in and can not get back. |
Total Revenue equation |
Price x quantity |
Why MR=MC |
profit maximizing |
Monopoly |
market with just one seller |
Competitive Market |
many buyers and sellers, standardized product, comparatively easy to enter the market. |
Monopolistic Competition |
A market structure in which barriers to entry are low and many firms compete by selling similar, but not identical, products. |
Game Theory |
An approach to modeling the strategic interaction of oligopolists in terms of moves and counter-moves. |
Oligopoly |
A marker dominated by a small number of strategically interacting firms. |
Discounting |
the act of converting a future value into its present day equivalent |
Discount rate |
The interest rate used in computing present values. |
Dividends |
part of a firm's current profit that is distributed to shareholders |