Micro Final Flashcards
PPB
production possibility boundary - amount of resources possible to produce
- can shift with changes in technology, price of resources or production
positive
statement that can be proven/fact based
normative
statement that is opinion based
absolute advantage
can produce greater quantity or mangnitude
comparative advantage
can produce with lower opportunity costs than other country
specialization
will specialize where they have lower comp. advanange
trade
you must give away less than it would cost you to produce yourself
demand
price change causes shift along demand curve (Qd)
- shifts in curve = consumer income, compliments, substitues
compliments
purchased with a product (printer and ink)
substitutes
ex. pepsi and coke
supply
shifts due to technology, tax, entry/exit
Equalibrium
set supply = to demand, solve for P sub back in to find q
Tax
subtract from entire supply equation
Elasticity of demand
change in Q relative to P
inelastic demand
not responsive to change in price (less than 1)
elastic demand
very responsive to change in price (greater than 1)
inelastic supply
not responsive to change in price
elastic supply
very responsive to change in price
percentage change
% change in Q/ % change in P
Equation for when you have two points
(Q2-Q1/P2-P1) x ((P2+P1/Q2+Q1)