Formulas and def Flashcards
Types of resources
land, labour, capital
3 problems of planned eco
information, incentive, chronic shortage
market eco thinker
Smith
positive statement
no value judgement
normative statement
value judgement
dependent variable
endogenous
independent variable
exogenous
3 different types of data
cross-sectional, time-series, panel
slope of a straight line
ΔA/ΔB
flow
over time
stock
at a specific point in time
augmentation in D
rightward shift of D curve
decrease in D
leftward shift of D curve
change in S/D
shift of the curve
change in QS/QD
mouvement along the curve
equilibrium
QS=QD
elastic
> 1
inelastic
< 1
unit elastic
= 1
P elasticity of D
%ΔQd/%ΔP
vertical D curve
perfectly inelastic
horizontal D curve
perfectly elastic
P elasticity of S
%ΔQS/%ΔP
income elasticity of D
%ΔQD/%Δ income
income elasticity for inferior good
elasticity < 0
income elasticity for normal good
elasticity > 0
income elasticity for necessities
positive but < 1
income elasticity for luxuries
positive but > 1
cross P elasticity of D
%ΔQDx/%ΔPy
cross elasticity of substitutes
> 0
cross elasticity of complements
< 0
binding price floor
above equilibrium
binding price ceiling
under equilibrium
losers and winners of rent controls
winners: exiting tenants
losers: landlords + potential future tenants
transitivity
x > y > z = x > z
different types of indifference curves
crossing, upward sloping, thick
marginal rate of substitution
the slope of the curve at a specific point
perfect substitutes
parallel straight curves
perfect complements
parallel 90° curves
imperfect substitutes ( normal goods)
non-straight curve
diminishing marginal utility
the more you have, the less marginal satisfaction you get
budget set
all affordable combinations of goods and services given a consumer’s income and prices
budget line
graphical representation of budget set
utility maximizing condition
MU1/MU2 = P1/P2
or
MU1/P1 = MU2/P2
real income
income expressed in terms of the purchasing power of money income
substitution effect
change in the QD of a product resulting from a change in its relative P
income effect
change in QD resulting from a change in real income
giffen good
inferior good with a positively sloped D curve and a large income effect (large proportion of tot expenditure)
normal good (graph)
income and substitution effect in same direction
inferior good (graph)
income effect partially affects substitution effect
giffen good (graph)
income effect outweights the substitution effect
conspicuous good
snob appeal
consumer value
difference between the total value that consumers place on all units consumed of a product and the P they actually pay
production function
Q = f(L,K)
Accounting profits
Revenues - Explicit costs
Eco profits
Revenues - (Explicit + Implicit Costs)
law of diminishing returns
equal increase in work effort begins to add less and less to total output
ATC curve
U-shaped
cost minimization condition
MPk/MPl = Pk/Pl
or
MPk/Pk = MPl/Pl
LRAC
falling: decreasing costs, increasing returns
constant: eco of scales, min efficient scale, constant costs and returns
increase: increased costs, decreased returns
STRATC
tangent to LRAC at optimal level of output
perfectly competitive market
each firm has 0 market power
profits maximization
MR = MC
MR > MC
increase output
MR < MC
decrease output
condition to shut down
Revenue < AVC
LR industry equilibrium
when profits = 0 (break-even P)
industries with many small firms
perfectly competitive, monopolistic competition
industries with a few large firms
oligopoly
imperfect competition
firms differentiate their products, set prices, non-price competition
