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32 Cards in this Set
- Front
- Back
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budget line slope |
-Px/Py |
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marginal utility (mu) |
du/dQ |
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maximal utility |
all income spent and MUx/Px = MUy/Py |
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mrs |
marginal rate of substitution=slope of IC |
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budget line slope |
relative price |
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substitution effect |
movement along indifference curve. always follow law of demand (increase Px decrease Qx increase Qy) |
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income effect |
movement to new IC. Normal: Increase Px decrease Qx and Qy by decrease of real income. Inferior: Increase Px increase Qx and decrease Qy |
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giffen good |
inferior good where income effect dominates substitution effect and therefore doesn't follow law of demand. |
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profit |
TR - TC = q(p-atc) |
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accounting profit |
revenue - explicit cost |
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economic profit |
revenue - opportunity cost |
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MPL |
marginal product of labor = dQ/dL (only econ GPA) |
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Average Product of Labor |
Q/L (total average GPA) |
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average variable cost |
wage/APL = VC/q |
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marginal cost |
wage/MPL = dTC/dQ = dVC/dQ |
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when does mc=atc or avc |
mc = atc and avc at minimum |
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perfect competition |
lots of firms producing perfect substitutes no barriers to entry |
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monopolistic competition |
lost of firms products are differentiated no barriers to entry |
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oligopoly |
small number of firms products may be perfect substitutes or not significant barriers to entry |
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monopoly |
one firm no close substitute significant barriers to entry |
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herfindahl hirschman index |
sum of squared market shares of all firms (top 50) |
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concentration ratio |
percent sales accounted for by the 4 largest firms in the industry |
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profit maximized |
MR=MC |
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stay in buisness |
TR > VC P > AVC |
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shut down when |
TR < VC P < AVC |
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shut down point |
TR = VC P = AVC |
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production efficiency |
producing as cheaply as possible (at min of ATC) |
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allocative efficiency |
using resources where they are most highly valued (MB=MC) |
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MR and Elasticity of Demand |
MR > 0 elastic MR < 0 inelastic MR = 0 unit elastic |
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natural monopoly |
natural barriers to entry (cost advantage), economies of scale |
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marginal cost pricing |
require monopoly to produce where mc=price but profit < 0 and firm exits |
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average cost pricing |
produce where price = AC so profit = 0 |
