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Flashcards in Micro Final Deck (50):
1

PPB

production possibility boundary - amount of resources possible to produce
- can shift with changes in technology, price of resources or production

2

positive

statement that can be proven/fact based

3

normative

statement that is opinion based

4

absolute advantage

can produce greater quantity or mangnitude

5

comparative advantage

can produce with lower opportunity costs than other country

6

specialization

will specialize where they have lower comp. advanange

7

trade

you must give away less than it would cost you to produce yourself

8

demand

price change causes shift along demand curve (Qd)
- shifts in curve = consumer income, compliments, substitues

9

compliments

purchased with a product (printer and ink)

10

substitutes

ex. pepsi and coke

11

supply

shifts due to technology, tax, entry/exit

12

Equalibrium

set supply = to demand, solve for P sub back in to find q

13

Tax

subtract from entire supply equation

14

Elasticity of demand

change in Q relative to P

15

inelastic demand

not responsive to change in price (less than 1)

16

elastic demand

very responsive to change in price (greater than 1)

17

inelastic supply

not responsive to change in price

18

elastic supply

very responsive to change in price

19

percentage change

% change in Q/ % change in P

20

Equation for when you have two points

(Q2-Q1/P2-P1) x ((P2+P1/Q2+Q1)

21

one point

change q/change p - this is slope of demand cureve x (p/q)

22

greater than 1

elastic

23

less than 1

inelastic

24

normal goods

when income increases Qd increases

25

inferior goods

when income increases Qd decreases

26

giffin goods

inferior good where income effect is greater than substitution effect

27

how to find if inferior or normal?

% change in Qd / % change in income ----- + (normal), - (inferior)

28

cross price elastity

% change Qd for goodx / % change in price for goodY

29

to find percentage change in something

old demand - new demand / old demand

30

Economic surplus

consumer and producer surplus together

31

Price floors

minimum price set, creates a surplus

32

price ceiling

maximum price set, creates a shortage

33

quota

same as floor and celing but vertical

34

deadweight loss

loss of economic surplus due to government intervention

35

black market

go up to demand curve from the quantity being supplied to find price on the black market

36

marginal utility

increases when consumption decreases, decreases when consumption increases

37

budget line

plot all possbible purchases (like PPB)

38

indifference curve

where it is tangent with budget line = purchase. Furtehr from origin the better

39

to max utility or long run coss

MUx/Px = MUy/Py

40

income and substitution effect

1. draw budget line and indif curve (point A)
2. draw new budget line and indif curve (point B)
3. shift new budget line to tough old indifference curve (C)

Dis between A and C is substituion effect

Dis. between B and C is income effect

41

If income and substituion move in same direction

normal good

42

If income and substituion move in opposite direction s

inferior good

43

marginal labour and capital

ML/MK decreases with more employees / capital

44

Assumptions

1. many sellers, 2. many buyers, 3. no differenciation 4. free entrance

45

Perfect competition

many firms with same product.
- zero profit
- produce where MC = ATC

46

Monopoly

price makers
- produce where MC = MR and charge up to the demand curve
- deadweight loss is between MC and demand

47

Monopolistic competition

many small firms w different products and prices (setters)
- SR = monopoly (MR = MC and charge P)
- LR = firms enter shifting demand and Rev down until demand is tangent to ATC

48

Game theory

make pay off matrix

49

Nash equalibrium

scenario where NEITHER firms would change their strategy

50

Dominant strategy

which strategy will maximize the payout for each firm regardless of what the other does?
- if it would change based on other firm there is no dominant strategy