Term
| price elasticity of demand |
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Definition
| a measure of the responsiveness of the quantity demanded to changes in price; equal to the absolute value of the percentage change in quantity demanded devided by the percentage change in price |
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Term
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Definition
| the price elasticity of demand is greater than one |
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Term
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Definition
| the price elasticity of demand is less than one |
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Term
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Definition
| the price elasticity of demand is one |
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Term
| perfectly inelastic demand |
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Definition
| the price elasticity of demand is zero |
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Term
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Definition
| the price elasticity of demand is infinite |
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Term
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Definition
| the money a firm generates from selling its product |
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Term
| income elasticity of demand |
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Definition
| a measure of the responsiveness of demand to changes in consumer income; equal to the percentage change in the quantity demanded divided by the percentage change in income |
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Term
| cross price elasticity of demand |
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Definition
| a measure of the responsiveness of demand to changes in the price of another good; equal to the percentage change in the quantity demanded of one good(x)divided by the percentage change in the price of another good (y) |
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Term
| price elasticity of supply |
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Definition
| a measure of the responsiveness of the quantity supplied to changes in price; equal to the percentage change in quantity supplied divided by the percentage change in price |
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Term
| perfectly inelastic supply |
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Definition
| the price elasticity of supply equals zero |
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Term
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Definition
| the price elasticity of supply is equal to infinity |
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Term
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Definition
| total revenue minus economic cost |
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Term
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Definition
| the opportunity cost of the inputs used in the production process; equal to explicit cost plus implicit cost |
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Term
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Definition
| the actual monetary payment for inputs |
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Term
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Definition
| the opportunity cost of inputs that do no require a monetary payment |
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Term
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Definition
| the explicit cost of production |
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Term
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Definition
| total revenue minus accounting cost |
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Term
| marginal product of labot |
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Definition
| the change in output from one additional unit of labor |
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Term
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Definition
| as one imput increases while the other inputs are held fixed, output increases at a decreasing rate |
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Term
| principle of opportunity cost |
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Definition
| the opportunity cost of something is what you sacrifice to get it |
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Term
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Definition
| a curve showing the relationship between the quantity of labor and the quantity of output produced, ceteris paribus |
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Term
| principle of diminishing returns |
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Definition
| suppose that outputs produced with two or more inputs and we increase one input while holding the other inputs fixed. beyond some point called the point of diminishing returns output will increase at a decreasing rate. |
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Term
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Definition
| cost that dos not vary with the quantity produced |
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Term
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Definition
| cost that varies with the quantity produced |
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Term
| short run total cost (tc) |
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Definition
| the total cost of production when at least one input is fixed; equal to fixed cost plus variable cost |
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Term
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Definition
| fixed cost divided by the quantity produced |
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Term
| average variable cost (AVC) |
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Definition
| variable cost divided by the quantity produced |
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Term
| short-run average total cost (atc) |
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Definition
| short run total cost divided by the quantity of output; equal to afc plus avc. |
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Term
| short run marginal cost (mc) |
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Definition
| the change in short run total cost resulting from a one unit increase in output |
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Term
| long run total cost (ltc) |
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Definition
| the total cost of production when a firm is perfectly flexible in choosing its inputs |
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Term
| long run average cost (lac) |
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Definition
| the long run cost divided by the quantity produced |
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Term
| constant returns to scale |
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Definition
| a situation in which the long run total cost increases proportionately with output, so average cost is constant |
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Term
| long run marginal cost (lmc) |
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Definition
| the change in long run cost resulting from a one unit increase in output |
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Term
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Definition
| an input that cannot be scaled down to produce a smaller quantity of output |
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Term
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Definition
| a situation in which the long run average cost of production decreases as output increases |
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Term
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Definition
| the output at which scale economies are exhausted |
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Term
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Definition
| a situation in which the long run average cost of production increases as output increases |
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Term
| perfectly competitive market |
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Definition
| a market with many sellers and buyers of a homogeneous product and no barriers to entry |
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Term
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Definition
| a buyer or seller that takes the market price as given |
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Term
| firm specific demand curve |
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Definition
| a curve showing the relationship between the price charged by a specific firm and the quantity the firm can sell |
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Term
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Definition
| a single firm serves the entire market |
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Term
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Definition
| there are no barriers to entering the market, so there are many firms, and each firm sells a slightly different product. |
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Term
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Definition
| the market consists of just a few firms because economies of scale or government policies limit the number of firms |
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Term
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Definition
| the change in total revenue from selling one more unit of output |
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Term
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Definition
| the price at which economic profit is zero; price equals average total cost |
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Term
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Definition
| the price at which the firm is indifferent between operating and shutting down; equal to the minimum average variable cost |
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Term
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Definition
| a cost that a firm has already paid or committed to pay, so it cannot be recovered |
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Term
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Definition
| a curve showing the relationship between the market price of a product and the quantity of output supplied by a firm in the short run. |
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Term
| short run market supply curve |
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Definition
| a curve showing the relationship between market price and the quantity supplied in the short run |
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Term
| long run market supply curve |
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Definition
| a curve showing the relationship between the market price and quantity supplied in the long run |
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Term
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Definition
| an industry in which the average cost of production increases as the total output of the industry increases; the long run supply curve is positively sloped |
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Term
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Definition
| an industry in which the average cost of production is constant; the long run supply curve is horizontal |
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