Chapter 1-5 Flashcards
A person who directs resources to achieve a stated goal
Manager
True or false.
The firm’s goal of maximizing profits is necessarily bad for society.
False. This is a common misconception.
What is total revenue minus total cost?
Accounting profits
The science of making decisions in the presence of scarce resources
Economics
The cost of explicit and implicit resources that is forgone when a decision is made
Opportunity cost
This implies that by making a choice, you give up another
Scarcity
An increase in price of good A will decrease the demand of good B. What do you call these goods?
Complements
What is the first step in making sound decisions?
Have well-defined goals
The study of how to direct scarce resources in the way that most efficiently achieves a managerial goal
Managerial Economics
This curve describes how many goods the consumer is willing to buy at a certain price
Demand curve
It is the consumer’s desire or willingness to pay a prices for a good or service
Demand
What are the 4 factors that affect quantity demanded?
Price of the good
Price of other goods (substitute, complements)
Income
Preferences/tastes
The fundamental economic principle which states that price and quantity demanded are inversely related (ceteris paribus)
Law of Demand
These are used to produce a good or service
Resources
Why is it that buyers are willing to purchase less of a good at a higher price?
Because they attach a higher level of satisfaction when consuming a relatively scarce good
What is an indicator the resources are scarce?
Price
What is total revenue minus opportunity cost?
Economic profits
It is one of the scarcest resources of all
Time
What do you call the variables other than the price of a good that influence demand?
Demand Shifters
What is the supply function? (use Q, P, and x)
Q = x + P
These are an artifact of scarcity
Contraints
The explicit cost of resources needed to produce goods or services
Accounting cost
A movement along a supply/demand curve is called?
Change in quantity supplied/demanded
The quantity of a good all consumers will buy at different prices
Market demand