Exam knowledge gaps Flashcards
What is Compensating variation / Equivalent variation?
The change in wealth, at current prices, that would have the same effect on consumer welfare as a change in prices
What is the formula for MRS?
-(dU/dx)/(dU/dY)
What is the optimal consumption level in terms of good X and Y?
(M/(pX+pY))
Where M = Income
On a Price/Quantity graph, the Firm’s profits are:
- Above supply curve
- Below equilibrium
On a price/Quantity graph, the consumer surplus is:
- Below demand curve
- Above equilibrium
Isoquants being convex to the origin shows evidence of:
Diminishing MRTS
What’s the formula for K* (Conditional demand for capital)
(q/1+r/w)^2
What is Marginal utility of income?
Incremental change in utility caused by a unit change in income
What is an offer curve?
A curve that shows the quantity of one type of product that an agent will offer for each quantity of another product it imports
What type of pricing is disneyland pricing?
Third degree price discrimination
What is the marginal rate of transformation for good X and Y?
-(Px/Py)
What is a weakly preferred set?
Set of bundles which provides the consumer equal or higher level of utility than the bundles on the IC
If IC is convex to the origin, it means a consumer prefers:
A more balanced bundle of goods
What are the three axioms of consumer choice?
- Completeness
- Transitivity
- Non satiation
What does the Completeness axiom mean?
Consumers possess preferences over all possible bundles
