Consumer Demand

Question 1

What is Giffen Good?

Answer 1

An inferior good where the negative income effect outweighs the positive substitution effect.

Question 2

What is a Veblen Good?

Answer 2

More utility out of a higher priced good. Luxury items. Must have a limit.

Question 3

What is accounting profit? What is economic profit?

Answer 3

Accounting Profit = total revenue - total accounting costs

Economic Profit = accounting profit - implicit opportunity costs
=total revenue - explicit costs - implicit costs

Question 4

What is normal profit?

Answer 4

Normal profit = accounting profit - economic profit

Question 5

Under perfect competition what are the relations between ATC, P, TR, TC?

Answer 5

Breakeven quantity is the quantity for which P = ATC + TR = Total Cost
The firm should shut down in the long run if P

Question 6

Under imperfect competition what are the relations between ATC, P, TR, TC

Answer 6

Breakeven = TR = TC

Shut down long run if TR