Elasticity and Costs

Question 1

Price elasticity of demand

Answer 1

how consumers respond to a change in price, a measures percentage in a change of quantity demanded due to a change in price

Question 2

Total revenue

Answer 2

the total dollar value of a quantity of an item sold at a certain price
formula: Price x quantity of products sold

Question 3

elastic demand

Answer 3

quantity demanded that is quite responsive to a change in price

Question 4

Unitary elasicity

Answer 4

the point where the percentage change in quantity is exactly equal to the percentage in the change of price

Question 5

elasticity of demand

Answer 5

percentage change in quantitiy divided by percentage change in price

Question 6

total cost

Answer 6

fixed + variable costs

Question 7

positive statement

Answer 7

a fact can be proven

Question 8

Normative statement

Answer 8

an opinion or beliefe

Question 9

Labour

Answer 9

human efforts

Question 10

land

Answer 10

a natural resource

Question 11

capital

Answer 11

tools

Question 12

enterprise

Answer 12

profit

Question 13

productive efficiency

Answer 13

output at the lowest possible cost

Question 14

3 fundamentals questions of economics

Answer 14

what to produce?
how to produce?
for whom?

Question 15

scarcity

Answer 15

points outside the curve, unlimited wants but limited resources

Question 16

determinants of demand

Answer 16

Consumer preference
consumer income
prices of related products
expectation of future price, income, & availibilty
population: age, income and age distribution

Question 17

Determinants of supply

Answer 17

Price of productive resources 
business taxes
technology
price of substitutes in production 
future expectation of suppliers
number of suppliers

Question 18

vertical axis

Answer 18

price

Question 19

Horizontal axis

Answer 19

Quantity

Question 20

law of diminishing marginal utility

Answer 20

the amount of diminshing utility (satisfaction) the consumer gets from the product the more it is consumed

Question 21

consumer surplus

Answer 21

the differnece between what a consumer is willing to pay and the actual price of a product

Question 22

normal profit

Answer 22

the minimum proft that must be earned to stay in business

Question 23

economic profit

Answer 23

revenue over and above all costs including normal profits

Question 24

sunk costs

Answer 24

coststhat are unrecoverable

Question 25

short run

Answer 25

any period of time in which at least one input in the production process is fixed (cannot be increased or decreased) example, a fixed size of land if fixed refarless of the amount of fertilizer used

Question 26

marginal product

Answer 26

the increase in total product aa result of adding one more unit of input practically speaking the marginal product is simply the extra from each additional worker

Question 27

Marginal cost

Answer 27

the increse in total variable costs as a result of producig one or more unit of production

Question 28

total fixed costs

Answer 28

costs that do not vary with the level of output

Question 29

long run

Answer 29

the period in which all inputs are variable, no fixed variables

Question 30

economies of scale

Answer 30

cost advantages achieved as a result of large scale operations

Question 31

implict costs

Answer 31

indirect costs (such as opportunity cost of working another job)

Question 32

explict cost

Answer 32

a cost that is actually paid out in money

Question 33

accounting profit

Answer 33

traditional out of pocket costs of running a business

Question 34

normal profit

Answer 34

the minimum level of profit business needs to stay in business

Question 35

total costs

Answer 35

variable + fixed costs

Question 36

economies of scale

Answer 36

companies that produce more can spread their fixed costs over lots of units, more advances faster machines huge companies that have a cost advantage

Question 37

diminishing marginal return

Answer 37

the act of adding until the profit begins to decrease * study example * overfilled kitchen leads to more money being spent to pay workers when there is limited resources

Question 38

sunk costs

Answer 38

costs that cant be recovered

Question 39

demand slope goes downward because

Answer 39

1. substitute effect 2. income effect 3. the law of diminishing marginal utility

Question 40

elasticity trick

Answer 40

Quarter Pounder | Q over P

Question 41

equals 0

Answer 41

perfectly inelastic

Question 42

equals greater than 1

Answer 42

relatively inelastic

Question 43

equals 1

Answer 43

unit elastic

Question 44

less than one

Answer 44

relatively elastic

Question 45

average fixed costs

Answer 45

total fixed costs/ quantity

Question 46

marginal costs

Answer 46

change in total variable costs/ change in quantity

Question 47

break even

Answer 47

not making money