Microecons Flashcards
Scarcity
Central econ problem, unlimited wants cannot be fulfilled by limited resources
PPC
shows all possible combinations of the maximum quantity of 2 goods a country can produce within a specified period of time with all its resources fully and efficiently employed at a given state of tech
Decision making process
- Final decision by econ agent
- Objective of EA
- Constraints faced (trade offs)
- Benefits and costs of this decision
- Weigh benefits and cost (B>C or C>B)
- Review decision (intended/unintended consequences/ int/ext changes)
DD
qty of the good that consumers are willing and able to consume at every given price over a given period of time ceteris paribus
Law of DD
at a given time the qty DD is inversely prop to its price ceteris paribus
EGYPT
Expectations
Gove policies
Income
Population
Price of related goods
Tastes and preferences
WETPIGS
**Weather **
Expectations of producers
Tech
Price of related goods
input prices
Gove policies
Sellers no of
Mkt eqm
intersection of DD SS curve, qty supplied exactly equal to qty dd at eqm price
Inferior goods
DD is negatively related to consumers Y
Normal good
DD is positively related to consumers Y
Substitures
alternative that can satisfy similar consumer wants
Complements
goods that enhance consumers satisfaction when consumed tgt
Price Elasticity of Demand (PED)
degree of responsiveness of the quantity demanded of a good
due to a change in its price, ceteris paribus.
PED = (% change in qty demanded of good A) / (% change in price of good A)
Income Elasticity of Demand (YED)
degree of responsiveness of demand of a good due to
changes in consumers’ income, ceteris paribus.
YED = (% change in demand of a good) / (% change in income)
Cross Elasticity of Demand (XED)
degree of responsiveness of demand of a good due to
changes in the price of related good, ceteris paribus.
XED = (% change in demand of good A) / (% change in price of good B)
Price Elasticity of Supply (PES)
degree of responsiveness of the quantity supplied of a good due
to a change in its price, ceteris paribus. PES = (% change in qty supplied of good A) / (% change in price of good A)
TR
P x Q
Consumer Surplus
the difference between the maximum amount price buyers are willing and able to pay for a good
and the actual price paid.
Measurement of consumer welfare
Producer Surplus
difference between the price sellers are willing and able to sell a good and the
actual price they receive.
Measurement of producers welfare
Price ceiling
Legally est max price
Set below eqm mkt price
Price floor
Legally est minimum price
Set above eqm mkt price
PC
many buyers/sellers
homo prod
perfect knowladge
no bte
LR normal profits
MPC
diff products
imperfect info
low bte
no dom firm
SR all 3
LR normal prof
Oligopoly
homo/diff products
a few dom firms
high bte
imperf info
SR all 3
LR Supernormal
Monopoly
Single producer
high bte
imperf info
no substitutes
Supernorm/norm profits
Profit max
mc=mr output
Allocative eff
P=mc
scarce resources allocated to produce a combi of g+s most wanted by society
cannot make someone better off without making someone worse off
Dynamic eff
R&D
Productive eff
FIRM: any point on LRAS
SOCIETY: LOWEST point on LRAS
Law of diminishing marginal returns
more qty of a variable factor used in combination with a given qty of fixed factor, theres a pt where an additional unit of the variable factor produces less output
IEOS
unit cost reductions as a result of expanding the firms scale of prod
IDOS
unit cost increments as a result of the firm overexpanding its scale of prod
EEOS
unit cost red as a result of the industry expanding
EDOS
unit cost increments as a result of the industry overexpanding
