Economics: Microeconomics Flashcards
Accounting Costs
Monetary value of economic resources used in performing an activity. The can be explicit out of pocket current payment or an allocation of historical payments (depreciation) for recourses. They do not include implicit opportunity costs
Accounting Profit
Income as reported on the income statement, in accordance with prevailing accounting standards, before the provisions for income tax expense
Average Fixed Cost
Total Fixed Cost divided by quantity produced
Average product
Measures the productivity of inputs on average and is calculated by dividing total product by the total number of units for a given input that is used to generate that output
Average Revenue
Total revenue divided by quantity sold
Average total cost
Total cost divided by quantity produced
Average variable cost
Total variable cost divided by quantity produced
economic cost
The number of units is produced and sold at which the companies net income is zero (Revenues = total cost) in the case of perfect competition, the quantity at which price average revenue and marginal revenue equal average total cost
Compliments
Goods that tend to be used together; technically, two goods whose cross-price elasticity of demand is negative
Cross-price elasticity of demand
The percentage change in quantity demanded for a given change in the price of another good; the responsiveness of the demand for product A that is associated with the change in price of product B
Decreasing returns to scale
When a production process leads to increases in output that are proportionally smaller than the increase in inputs
Demand Curve
Graph of the inverse demand function. A graph showing the demand function, either the highest quantity willingly purchased at each price or the highest price willingly paid for each quantity
Demand Function
A relationship that expresses the quantity demanded of a good or service as a function of own-price and possibly other variables.
Diseconomies of Scale
Increase in cost per unit resulting from increases production
Economic Costs
All the renumeration needed to keep a productive resource in its current employment or to acquire the resource for productive use; the sum of total accounting costs and implicit opportunity costs
Economic loss
The amount by which accounting profit is less than normal profit
Economic Profit
Equal to accounting profit less the implicit opportunity costs not included in total accounting costs; the difference between total revenue and total cost
Economies of Scale
Reduction in cost per unit resulting from increased production
Elastic
Said of a good or service when the magnitude of elasticity is greater than one
Elasticity
The percentage change in one variable for a percentage change in another variable; a general measure of how sensitive one variable is to a change in the value of another variable
Elasticity of Demand
A measure of density of the Quantity demanded to a change in the products own price %ChangeQ/%ChangeP
Elasticity of Supply
A measure of the sensitivity of quantity supplied to a change in price %changeQ/%changeP
Giffen Goods
Goods that are more as the price of the good rises because it is a very inferior food whose income effect overwhelms its substitution effect when price changes
Increasing marginal returns
When the marginal product of a resource increases as additional units of that input are employed
