Economics Vol 2

Question 1

Demand Curve

Answer 1

highest quantity willingly purchased at each price AND the highest price willing paid at each quantity

Question 2

Elasticity of demand/ supply

Answer 2

how sensitive demand/supply is to a change in price

Expressed as a ratio of percent changes

Question 3

Magnitude

Answer 3

measures number, excluding if the value is pos or neg

Question 4

Inelastic

Answer 4

Q demanded is not very sensitive to a change in P;

When magnitude of own-price elasticity < 1

Question 5

Elastic

Answer 5

Q is sensitive to a change in P

When magnitude of own-price elasticity > 1

Question 6

Unit elastic

Answer 6

when the own-price elasticity = -1

Question 7

Perfectly inelastic

Answer 7

when Q is not at all sensitive to P; Vertical demand curve

Question 8

Perfectly Elastic

Answer 8

Horizontal demand curve at some given price;

Shows that the slightest increase in price will reduce quantity demanded to 0

Question 9

Durable Goods

Answer 9

goods that are investment; ex: dishwasher

Question 10

Elastic Good

Answer 10

price and total expenditure move oppositely

Question 11

Inelastic Good

Answer 11

price and total expenditure move in same direction

Question 12

Elastic Markets

Answer 12

Decrease in price = more goods sold = increase in total revenue

Question 13

Inelastic markets

Answer 13

Decrease in price = decrease in total revenue

Question 14

Income Elasticity of Demand

Answer 14

how sensitive demand is to consumer income

Question 15

Normal Goods

Answer 15

positive income elasticity; goods that increase in demand with more income

Question 16

Inferior Goods

Answer 16

negative income elasticity; demands decreases when income increases

Question 17

Cross-Price Elasticity

Answer 17

sensitivity of demand in relation to price of a separate good

Question 18

Substitutes

Answer 18

hen the price in Good Y increases, the demand of Good X increases

Question 19

Complements

Answer 19

price in Good Y increases, demand for Good X decreases

Question 20

Income effects

Answer 20

when the price of a good decreases AND consumers’ income increases

Question 21

Real Income

Answer 21

the amount of income a person has after a product that they regularly purchase decreases

Question 22

Giffen Good

Answer 22

when the income effect is SO strong, it overpowers the substitution effect

Question 23

Veblen Goods- status symbols

Answer 23

increase in price = increase in demand (status symbols

Question 24

Marginal Product (MP)

Answer 24

productivity of each additional unit for resources

Question 25

Increasing Marginal Returns

Answer 25

when marginal product increases as additional inputs are used

Question 26

Input Productivity

Answer 26

measure of output per unit of input

Question 27

Inputs

Answer 27

factors of production

Question 28

Total Cost

Answer 28

cost of all the firms inputs

Question 29

Total Product

Answer 29

sum of all output from all inputs during a time period; total output (Q)

Question 30

Average Product

Answer 30

total product / Q of a given input; measures productivity of an input on average; measures the average amount of productivity per worker

Question 31

Marginal Product/ Marginal Return

Answer 31

amount of additional output from using one or more unit of input (assuming other inputs are fixed); measures productivity of each additional unit of input (with other resource quantities remaining fixed); shows productivity gained/lost by adding another worker for another hour

Question 32

Economic Profit

Answer 32

Total Revenue (TR) - total economic costs (TC)

Question 33

Economic Costs

Answer 33

opportunity costs- an expense that could have been spent on something else, or a missed opportunity to make income

Question 34

Accounting Profits

Answer 34

Total Return (TR) - total accounting costs; used to spread historical costs for taxes

Question 35

Marginal Revenue

Answer 35

Additional revenue realized from the decision to increase output by one unit per time period

Question 36

Marginal Cost

Answer 36

increase in total cost from the decision to increase output by one unit per period of time

Question 37

Variable Costs

Answer 37

Costs that move with level of production and sales

Question 38

Average Variable Cost (AVC)

Answer 38

ratio of total variable cost to total output

Question 39

Total Fixed Cost

Answer 39

Sum of all expenses that don’t change as level of production changes

Question 40

Total Variable Cost

Answer 40

Sum of all variable expenses

Question 41

Average Revenue

Answer 41

Revenue per unit OR price per unit

Question 42

Economic Loss

Answer 42

When a firm’s revenue doesn’t meet the total opportunity cost

Question 43

Shutdown Point

Answer 43

Lowest point on the AVC curve

Question 44

Breakeven Point

Answer 44

Lowest point on the ATC curve

Question 45

Economies of Scale

Answer 45

when a firm increases output and the cost per unit of production falls; negative LRAC slope

Question 46

Diseconomies of Scale

Answer 46

hen increase in output creates increase in the cost of unit of production; positive LRAC slope

Question 47

Minimum Efficient Scale

Answer 47

minimum point on the LRAC