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Economics > Micro > Flashcards

Micro Flashcards

1
Q

MR

A

dTR/dQ

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2
Q

PED

A

DQ/q/Dp/p = (dQ/dP) * (P/Q)

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3
Q

MR and E

A

MR = P (1+1/Ed)

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4
Q

First Degree Price discrimination

A

Charging the maximum WTP per uni

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5
Q

2nd Degress price discrimination

A

Bulk discounts

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6
Q

3rd degree

A

Charing a different price to different markets with different demand curves

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7
Q

Conditions for price discrimination

A
  1. Firm must be a price setter
  2. Prevent resale
  3. Face groups with different WTP
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8
Q

Hurwcz Criteria

A

alphaworst+1-Alphabest

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9
Q

Market Failure

A

The inability of a market to produce a pareto efficent outcome.

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10
Q

merit good

A

a good that consumption has a positive externality

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11
Q

demerit good

A

a good that’s consumption has a negative externality

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12
Q

non-rival in consumption

A

one person’s consumption does not reduce the amount available to anyone else. eg. Defence, information

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13
Q

non-excludable

A

available to all

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14
Q

club good

A

non-rival, but excludable

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15
Q

Pecuniary social effects

A

Indirect effects that occurr through the price mechanism

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16
Q

Techcological social effects

A

Effects that occurr outside the price mechanism ‘externalities’

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17
Q

Coase Theorm

A

if there are no transaction costs and property rights are well defined (exchangeable, private and legally enforcable), an efficient market allocation will result. Regardless of wo owns the river.

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18
Q

common property

A

Owned by society as a whole

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19
Q

private property

A

owned privately, can either be exchangeable or non-exchangable.

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20
Q

inferior good

A

WIth rising income and constant prices, the demand for an inferior good will decrease. Negative YED

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21
Q

Normal good

A

with rising income and constant prices, the demand for a normal good will increase. Positive YED

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22
Q

Complements

A

a rise in the price of one good leads to a fall in demand of the other good. Negative XED

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23
Q

Substitutes

A

A ris ein the price of one goods leads to an increase in the demand for the other good. Positive XED.

24
Q

inverse demand function

A

Price in terms of quantitiy

25
Q

inverse demand function

A

Price in terms of quantity

26
Q

Engel Curve

A

Relationship between the consumer’s income and the quantity demanded. Derived from the tangencies of the utility function on the consumption possibilities line with increasing income.

27
Q

income effect

A

the effect of the change in income on quantitiy

28
Q

substitution effect

A

the effect of a change in prices on quantity

29
Q

A,B,C

A

A=original point, B= new point, C= new budget line on old IC, A to C is SE. and B to C is IE

30
Q

lespeyres price index

A

income necessary to achieve original consumption bundle relative to old income necessary.

31
Q

Compensating variation

A

the amount of additional income an agent would need to reach their original consumption bundle. AKA, the change in income required to reach old consumption bundle

32
Q

Equivalent variation

A

the amount the agent would pay to prevent a price rise. AKA Total expenditure - current quantity * old prices.

33
Q

MR and E

A

MR = P(1+1/e)

34
Q

PED

A

(dQ/Q)/(DP/P)

35
Q

Markup

A

(p-mc)/p

36
Q

Bertrand model

A

Allocatively efficent

37
Q

Cournot model

A

simultaneous, Q=qa+qb

38
Q

stackleberg

A

One firm is sophisticated

39
Q

Isocost

A

all production points that have the same cost. Derived from the cost function. M = wL +rK

40
Q

XED

A

(dQa/Qa)/(dPb/pb)= (dqa/dpb) * (pb/qa)

41
Q

YED

A

(dQ/Q)/(dY/Y)*(Y/Q)

42
Q

Completeness

A

first axiom. Completeness. All preferences are complete. For any two bundles either xRy or yRx or both (indifferent)

43
Q

Reflexivity

A

Second axiom. reflexivity, each bundle lies on its own indifference set. xRx

44
Q

Transitivity

A

third axiom. Indifference curves do not cross. if zRx and xRy y cannot Rz

45
Q

Axiom of greed

A

more is preferred to less. IC is a line that slopes downwards and to the right, individual is on the boundary of the budget constraint.

46
Q

Continuity and smoothness

A

Defined for all values ( no breaks), No kinks in the IC, (always defined)

47
Q

Strict convexity

A

convex to the origin, individuals want to consume some of every good.

48
Q

Weak preferance ordering

A

if reflexitvity, completeness and transitivity are satisfied, then R shows a weak preference ordering. weak, because you may be indifferent between two bundles in the ordering.

49
Q

Price expansion path

A

the optimal quantity of x as px changes.

50
Q

drp

A

directly revealed preferred

50
Q

Revealed Preferance theory axioms

A

Axiom of greed, Only one optimal bundle per BC, For each optimal bundle there is only one BC on which it is optimal. WARP - assumptino of consistency

51
Q

Substitution effect RPT

A

Can rule out area bounded by old BC, new BC and the origin by WARP, consistnecy. Rule out interior bundles by greed and therefore the new BC must lie on the AS. If this is to the right of A, SE is positive if to the left it is negative.

52
Q

RPT and Lespeyres index

A

By comparing the amount spent on bundle B after the change in income and prices to the amount that would be spent on the old bundle A with the new prices we can see if the agent is better off. If the cost of the old bundle at new prices is lower then B drp A because they had the option to consume the old bundle and chose not to.

53
Q

Paache Index

A

if the old bundle is considered and the cost of this bundle compared to the cost of the new bundle at old prices. If A is greater than B, the A drp B

54
Q

Consumer optimisation

A

maximising utility subject to costs. the highest indifference curve on a given budget constraint.

55
Q

Producer optimisation

A

Minimising cost subject to quantity produced. The lowest Isocost curve on a given Isoquant

Economics (3 decks)

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