Help
Options
Didn't know it?
click below
click below
Knew it?
click below
click below
Don't Know
Remaining cards (0)
Know
retry
shuffle
restart
0:00
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
Econ Exam 2
Micro-Econ
| Term | Definition |
|---|---|
| Economics of Scale | A company can increase their cost per unit by increasing volume. -increase land or merge companies |
| Market Equilibrium | Exists when the amount of consumers are willing and able to buy is matched by the amount suppliers are willing and able to supply. -(No surpluses or shortages) |
| Market equilibrium price | The price where supply equals demand |
| Market equilibrium quantity | The quantity that exists when supply equals demand |
| Natural market adjustment process | The process of consumers and suppliers work together to bring the market price somewhere near the market equilibrium price |
| Elasticity | Designed to measure the responsiveness of a dependent variable to an independent variable |
| Equation for elasticity | % change of Dependent variable / % change of independent variable |
| Price elasticity of demand (Epd) | The relative or percentage change in quantity demanded which is brought about by a percentage or relative change in price (Don't care about the sign of the final answer) |
| Relatively Elastic | A decrease (increase) in price will bring about a larger percentage increase (decrease) in the quantity demanded than the original change in price. (Final answer >1 Epd) |
| Relatively Inelastic | A decrease (increase) in price will bring about a smaller percentage increase (decrease) in the quantity demanded than the original change in price. (Final answer <1 Epd) |
| Unitary Elastic | A percentage change in price will bring about an equal percentage change in quantity demanded (Epd=1) |
| Total Revenue Test 1) | If the current price is in the elastic portion of the demand curve, total revenue is increased by lowering price |
| Total Revenue Test 2) | If the current price is in the inelastic portion of the demand curve, total revenue is increased by raising the price |
| Total Revenue Test 3) | Total revenue is maximized at the unitary point |
| Cross Price Elasticity (ECD) | Shows the responsiveness of the quantity demanded of good (x) to the price change of some other good (w) (% change of Quantity of good (x) / % change of Price of good (w)) Significance is whether it's negative or positive |
| Income Elasticity go Demand (EYD) | Shows the responsiveness of consumers to changes in income (% change of Quantity good (x) / % change of income) normal good: + inferior good: - |
| Price Elasticity of Supply (EPS) | Shows us the responsiveness of quantity supplied to price changes (% change of quantity of good (x) / % change of price of good (x)) |
| Price ceiling | A maximum price placed on the market below the equilibrium price |
| Price floor | A minimum price placed on the market above the equilibrium price |
| Consumer Surplus | The difference between the maximum price that consumers are willing to pay and the price that they actually pay. |
| Equal Marginal Rule | Consumers will consume each good in their bundle of consumption such that the marginal utility per dollar spent is equal for all goods |
| indifference Curve | Shows all combinations of 2 goods which yield consumers equal amounts of satisfaction |
| Marginal Rate of Substitution | The amount of one good a consumer could substitute for another good to remain equally satisfied |
| Budget line | Shows all of the maximum combinations of 2 goods that a consumer is able to select, given their income and the price of 2 goods |
| The consumer problem | Consumers are trying to maximize their utility given their budget |
Created by:
amyjuhnke
Popular Economics sets