econ final elzemhga section 9 Flashcards
Alfred Marshall
elasticity
Marginal cost
Additional cost to you over and above the costs you have already incurred
Substitutes
goods used in place of one another, positive XPE
Complements
goods used together, negative XPE
MU formula
TU2 - TU1
Rational means…
utility maximizing
Explicit costs
resources, contractual
Implicit costs
opportunity costs, noncontractual
Principle agent problem
When the agent (worker or manager) doesn’t act in the best interest of the principle (owner).
Inputs
land, labor, capital, entrepreneurial ability
A firm is…
a bundle of contracts
Search costs
time spent shopping
Transaction costs
paying a real estate agent, lawyer, etc.
Solutions to the principle agent problem
Piece rates, promotions, profit sharing, deferred compensation, bonuses, commissions,
posting a bond, tipping
Variable costs
operating costs, vary with output
