Marginalists and Neoclassical Economics: Key Words and Concepts Flashcards

1
Q

Marginalism

A

Definition: An economic approach focusing on the marginal utility or productivity of goods and inputs to determine value and prices.

Key Idea: Decisions are made at the margin, considering the additional benefits or costs of the next unit.

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2
Q

Marginal Utility

A

Definition: The additional satisfaction or benefit derived from consuming one more unit of a good or service.

Key Thinker: William Stanley Jevons.

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3
Q

Marginal Productivity

A

Definition: The additional output produced by employing one more unit of a production factor (e.g., labor or capital).

Application: Used to determine wages, rents, and profits.

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4
Q

General Equilibrium Theory

A

Definition: A model where supply and demand in all markets are interdependent and simultaneously reach equilibrium.
Key Thinker: Léon Walras.

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5
Q

Law of Diminishing Marginal Utility

A

Definition: The principle that as more of a good is consumed, the additional satisfaction from each subsequent unit decreases.
Example: Eating one slice of pizza provides more satisfaction than the second or third.

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6
Q

Consumer Surplus

A

Definition: The difference between the price a consumer is willing to pay and the actual price they pay.

Key Thinker: Alfred Marshall.

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7
Q

Elasticity

A

Definition: A measure of the responsiveness of quantity demanded or supplied to changes in price or other factors.

Types: Price elasticity, income elasticity, and cross-price elasticity.

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8
Q

Opportunity Cost

A

Definition: The value of the next best alternative foregone when a choice is made.

Key Idea: Central to decision-making and resource allocation.

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9
Q

Partial Equilibrium Analysis

A

Definition: Analyzes equilibrium in a single market while holding other markets constant.

Key Thinker: Alfred Marshall.

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10
Q

Factors of Production

A

Definition: Inputs used in production: land, labor, capital, and entrepreneurship.

Neoclassical Contribution: Focus on their marginal productivity to determine distribution.

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11
Q

Utility Maximization

A

Definition: The assumption that individuals seek to maximize their satisfaction or utility within their budget constraints.

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12
Q

Producer Surplus

A

Definition: The difference between the price a producer is willing to accept and the actual price they receive.

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13
Q

Pareto Efficiency

A

Definition: An economic state where no individual can be made better off without making someone else worse off.

Key Thinker: Vilfredo Pareto.

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14
Q

Isoquant Curve

A

Definition: A graph showing all combinations of inputs that produce the same level of output.

Key Idea: Used in production theory to analyze efficiency.

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15
Q

Indifference Curve

A

Definition: A graph showing combinations of goods that provide the same level of satisfaction to a consumer.

Application: Illustrates consumer preferences.

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16
Q

Walras’ Law

A

Definition: In a general equilibrium system, if all markets but one are in equilibrium, the last market must also be in equilibrium.

17
Q

Edgeworth Box

A

Definition: A graphical representation of resource allocation and trade-offs between two individuals or firms.

18
Q

Perfect Competition

A

Definition: A market structure characterized by many buyers and sellers, homogeneous products, and free market entry and exit.