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Micro Econ > Elasticity and Costs > Flashcards

Elasticity and Costs Flashcards

1
Q

Price elasticity of demand

A

how consumers respond to a change in price, a measures percentage in a change of quantity demanded due to a change in price

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2
Q

Total revenue

A

the total dollar value of a quantity of an item sold at a certain price
formula: Price x quantity of products sold

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3
Q

elastic demand

A

quantity demanded that is quite responsive to a change in price

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4
Q

Unitary elasicity

A

the point where the percentage change in quantity is exactly equal to the percentage in the change of price

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5
Q

elasticity of demand

A

percentage change in quantitiy divided by percentage change in price

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6
Q

total cost

A

fixed + variable costs

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7
Q

positive statement

A

a fact can be proven

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8
Q

Normative statement

A

an opinion or beliefe

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9
Q

Labour

A

human efforts

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10
Q

land

A

a natural resource

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11
Q

capital

A

tools

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12
Q

enterprise

A

profit

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13
Q

productive efficiency

A

output at the lowest possible cost

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14
Q

3 fundamentals questions of economics

A

what to produce?
how to produce?
for whom?

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15
Q

scarcity

A

points outside the curve, unlimited wants but limited resources

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16
Q

determinants of demand

A

Consumer preference
consumer income
prices of related products
expectation of future price, income, & availibilty
population: age, income and age distribution

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17
Q

Determinants of supply

A 
Price of productive resources 
business taxes
technology
price of substitutes in production 
future expectation of suppliers
number of suppliers
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18
Q

vertical axis

A

price

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19
Q

Horizontal axis

A

Quantity

20
Q

law of diminishing marginal utility

A

the amount of diminshing utility (satisfaction) the consumer gets from the product the more it is consumed

21
Q

consumer surplus

A

the differnece between what a consumer is willing to pay and the actual price of a product

22
Q

normal profit

A

the minimum proft that must be earned to stay in business

23
Q

economic profit

A

revenue over and above all costs including normal profits

24
Q

sunk costs

A

coststhat are unrecoverable

25
Q

short run

A

any period of time in which at least one input in the production process is fixed (cannot be increased or decreased) example, a fixed size of land if fixed refarless of the amount of fertilizer used

26
Q

marginal product

A

the increase in total product aa result of adding one more unit of input
practically speaking the marginal product is simply the extra from each additional worker

27
Q

Marginal cost

A

the increse in total variable costs as a result of producig one or more unit of production

28
Q

total fixed costs

A

costs that do not vary with the level of output

29
Q

long run

A

the period in which all inputs are variable, no fixed variables

30
Q

economies of scale

A

cost advantages achieved as a result of large scale operations

31
Q

implict costs

A

indirect costs (such as opportunity cost of working another job)

32
Q

explict cost

A

a cost that is actually paid out in money

33
Q

accounting profit

A

traditional out of pocket costs of running a business

34
Q

normal profit

A

the minimum level of profit business needs to stay in business

35
Q

total costs

A

variable + fixed costs

36
Q

economies of scale

A

companies that produce more can spread their fixed costs over lots of units, more advances faster machines
huge companies that have a cost advantage

37
Q

diminishing marginal return

A

the act of adding until the profit begins to decrease

  • study example
  • overfilled kitchen leads to more money being spent to pay workers when there is limited resources
38
Q

sunk costs

A

costs that cant be recovered

39
Q

demand slope goes downward because

A
  1. substitute effect
  2. income effect
  3. the law of diminishing marginal utility
40
Q

elasticity trick

A

Quarter Pounder

Q over P

41
Q

equals 0

A

perfectly inelastic

42
Q

equals greater than 1

A

relatively inelastic

43
Q

equals 1

A

unit elastic

44
Q

less than one

A

relatively elastic

45
Q

average fixed costs

A

total fixed costs/ quantity

46
Q

marginal costs

A

change in total variable costs/ change in quantity

47
Q

break even

A

not making money

Micro Econ (2 decks)

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