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econ- part 2
| Question | Answer |
|---|---|
| dead weight loss | lost surplus from transactions that no longer occur due to price control |
| a price ceiling below the equilibrium price makes | all producers worse off |
| another word for quantity control | quota |
| wedge (quota rent) | vertical gap in between demand and supply price |
| when calculating the price elasticity of demand, you should always | drop the minus sign |
| perfectly innelastic | price doesn't affect the quantity demanded |
| perfectly elastic | any change in price will affect quantity demanded |
| elasticity greater than 1 | elastic |
| elasticity less than 1 | innelastic |
| elasticity =1 | unit elastic |
| cross price elasticity is positive | goods are substitutes |
| cross price elasticity is negative | goods are complements |
| income elasticity is positive | normal good |
| income elasticity is negative | inferior good |
| explicit cost | causes outlay of $ |
| implicit cost | represents benefits forgone |
| implicit cost of capital | income that would have been earned if capital was employed to its next best alternative use |
| economic profit | revenue - (explicit+implicit costs) |
| how to make an either or decision | choose the option with positive economics profit |
| how to make a "how much" decision | find the optimal quantity- generates max possible profit |
| coase thm | economy will always reach an efficient solution given that the costs a deal are sufficiently low |
| internalizing an externality | individuals take into account the costs and benefits of an externality |
| transaction cost | cost of making a deal |
| network externality | value of a good/service increases as the number of people who use it increases |
| utility maximizing principle of marginal analysis | marginal utility per dollar on each good/service in the consumption bundle is the same |
| substitution effect | consumer substitutes goods that are relatively cheaper in place of a good that has become relatively expensive |
| income effect | change in quantity consumed resulting from increase in purchasing power |
Created by:
gschultz2028