Term
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Definition
| The amount of labor embodied in the goods (labor theory of value) |
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Term
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Definition
| Extra satisfaction from the extra consumption |
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Term
| When consumption increases what happens to marginal utility |
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Definition
| Marginal utility decreases |
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Term
| When the consumption goes down, what happens to the Marginal utility? |
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Definition
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Term
| Set of assumption...about consumption...i think(there are 3) |
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Definition
1. individuals are rational, selfish, utility maximizers and individuals are never satisfied
2. human beings have certain/given income that they can allocate for the consumtion of goods
3. given the process in the market p1 and p2 individuals choose q1 and q2 (price takers) |
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Term
On the graph, where is the consumer surplus located?
And at what point do we consume? |
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Definition
| it is the shaded area under the curve, below the marginal utility and and above the price |
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Term
| Marginal Rate of Substitution |
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Definition
| Willingness to give up one good for another, while keeping the same level of total utility |
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Term
| What does the slope of a budget constraint show? |
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Definition
The trade-off between g1 and g2, giving p1 and p2
the opportunity cost of giving up goods |
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Term
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Definition
| Where the MRS meets the -p1/p2 |
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Term
True or False?
All the points on the Demand Curve are points of utility maximization or bliss points. |
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Definition
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Term
| What happens when an individual chooses to consume more? |
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Definition
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Term
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Definition
| The measure of responsiveness |
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Term
| How do you calculate the price elasticity of demand? |
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Definition
i. % change Q/% change P
ii. (change Q/avg Q)/(change P/avg P)
iii. P/Q x 1/slope |
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Term
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Definition
| When Ep is greater than 1 |
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Term
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Definition
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Term
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Definition
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Term
| What are the determinents of price elasticity of demand? |
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Definition
1. the nature of the good
2. availability of close subsitutes
3. share of the consumer's budget
4. time |
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Term
Are normal goods more income elastic or more income inelastics?
What about inferior goods? |
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Definition
Normal goods are more income inelastic
Inferior goods are more income elastic |
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Term
| What are the sources of income? |
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Definition
1. land (rent)
2. labor (wages)
3. capital (interest rate)
4. entrepreneurship (profits) |
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Term
| What is Marginal Physical Product? |
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Definition
The increase in output that results from a unit increase in the amount used of an input-holding the amount of other inputs constant
MPP= change g/change in hL |
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Term
| Marginal Revenue Product (MRP) |
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Definition
The money value of the extra production from the extra unit of an input
MRP=MPPxPg |
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Term
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Definition
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Term
1.Profits equal ______ minus _________.
2.Total Profits equal _______ minus ________. |
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Definition
1. revenues- costs
2. total revenues- total costs |
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Term
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Definition
| Individuals, banks, intstitutions that lend funds out |
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Term
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Definition
| Residual/ difference between revenues and costs |
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Term
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Definition
| Total revenue of the firm minus all of its costs including the interest rate and the opportunity cost capital that it obtains from its investors |
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Term
| In the long run, profits are equal to the _______ ____ and the ______ _____ are zero |
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Definition
1. interest rate
2. economic profits |
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Term
| In the short run, firms can make more than _____ ___, more than other _____ make |
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Definition
1. interest rate
2. firms |
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Term
| What is the goal in the demand of labor? |
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Definition
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Term
| Marginal profits equation |
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Definition
| change in profits/ change in hL |
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Term
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Definition
A wage increase is the resulting incentive to work more because of higher reward to labor
when the wage rate goes up, the price of leisure goes up (opportunity of leisure) |
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Term
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Definition
| The resulting rise rise fo workers purchasing power that enables them to consume more leisure |
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Term
| The supply of labor depends on the strength of the ________ and the _______ ________. |
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Definition
1. substitution
2. income effects |
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Term
What equals income?
(there are four things) |
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Definition
1. wages
2. interest rate
3. rent
4. profit |
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Term
| Cost of production in the S-R |
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Definition
- in the S-R, k is fixed
- in the S-R firms have a fixed cost, the cost of capital --> r x k |
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Term
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Definition
| extra cost of an extra unit of output |
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Term
Perfect Competition
(four points) |
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Definition
i. firms produce and sell identical goods (perfect substitutes)
ii. firms are small compared to the mkt and can sell as many goods as it wants (the firm) as long as it changes the mkt price (price takers)
iii. perfect information
iv. free entry and exit from the mkt |
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Term
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Definition
| Marginal revenue, demand, average revenue, and price |
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Term
| The firm will produce q at which the firm has max profits...what is this point? |
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Definition
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Term
| Total Revenue is equal to ______ x ______. |
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Definition
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