Complete List of Terms and Definitions for Microeconomics Midterm 3

Terms Definitions
Scarcity Other purposes
private good excludable and rivaled
Monopoly -1 Firm-Difficult to enter market-Utility-No close substitutes
Necessity goods are in general, inelastic
Equity property of distributing prosperity fairly among the members of society.
equilibrium price and quantity where quantity supplied = quantity demanded; compromise btwn actual buyers willing/able to buy product @ equil. price and actual sellers w/a to produce @ equil. amount; OPTIMAL
Investment Spending for the production and accumulation of capital and additions to inventories
If demand is elastic, TR _________ decreases
Some Consumers _________ because of price ceilings gain
Industrial regulation- government regulation of firms' prices (or "rates") within selected industries
supply elasticity meaure of the responsiveness or sensitivity of Qs to change in P
Entrepreneurship The particular talent that some people have for organizing the resources of land, labor, and capital to produce goods and services, seek new business opportunities, and develop new ways of doing things. Entrepreneurs are paid a profit.
 
INPUT 		 
any good /service used to produce any other goods/services
Supply minimum price a producer must receive for a quantity of goods and services
Variable Any well-defined item, such as the price or quantity of a commodity, that can take on various specific values
Allocative Efficiency The apportionment of resources among firms and industries to obtain the production of the products most wanted by society; the output of each product at which its marginal cost and price or marginal benefit are equal.
price of stock divided by earnings per share PE
revenue total amout recieved for selling a good or sercive calulated by muit price per unit x the number of units sold
Laissez-faire perspective- view competition as a long-run dynamic process in which firms battle against each other for dominance of markets. A process of creative destruction occurs in today's monopolies and government therefore should not try to break them up.
calc of cross elasticity (percentage change in quantity demanded)/(percentage change in price of a substitute or complement)
future contract agree on today on price you pay in future for commodity.
Substitution Effect The change in consumption that results when a price change moves the consumer along a give indifference curve to a point with a new marginal rate of substitution 
Budget Constraint the cost of a consumer's consumption bundle must be no more than the consumer's income
 
you can't spend more money than you have
 
consumption bundles are affordable only when they obey this rule
Department of Justice also empowered to act against violators of antitrust laws. It initiates action against those who violate antitrust laws and decides which cases to prosecute and against whom to bring criminal charges (FTC cannot bring criminal charges).
Producer Surplus Amount of money the producer receives over and above what they needed to make.
Free-Market Economy An economy in which most economic decisions are made by private households and firms
If supply shifts, you are unsure about ________ PS
Variable costs increase or decrease with a firm’s output
dividend divided by stock price at closing Yield %
production possibilites fronter curve showing the maximum combinations of products
Preferred provider organizations (PPOs)- require that hospitals and physicians accept discounted prices for their service as a condition for being included in the insurance plan. Reduces health insurance premiums and health care expenditures.
perfectly elastic demand *if the quantity demanded changes by an infinitely large percentage in response to a tiny price change, then the price elasticity of demand is infinity and the good is said to have perfectly elastic demand.*ex:soft drinks
natural monopoly an industry in which 1 firm can achieve economies of scale over entire range of mkt supply
Shortage when a supply of a certain good falls short of demand
 
TOTAL SURPLUS 		sum of consumer & producer surplus in market 
INCREASE SURPLUS:


reallocate consumption among consumers (who goods go to)
reallocate sales among sellers (who sells the goods) 
change quantity traded (continue to trade) 
Monopolistic Competition A market structure in which many firms sell a differentiated product, into which entry is relatively easy, in which the firm has some control over its product price, and in which there is considerable nonprice competition.
Indifference Curve A curve that shows the combination of consumption bundles that give the customer the same utility.
Comparable worth the idea that pay ought to be determined by job characteristics rather than by supply and demand and that people in jobs with comparable requirements should receive comparable wages
Optimum Achieved Money income is allocated so that the last dollar spent on each product yields the same extra or marginal utility
number of shares traded per day in hundreds Vol 100s
price-taking producer a producer whos actions have no effect on the market price of the good or service it sells
World Trade Organization (WTO)- oversees trade agreements and rules on disputes relating to them. Provides forums for trade negotiations that are aimed at reducing tariffs and quotas, as well as agricultural subsidies that distort trade.
Import Quotas A limit imposed by a nation on the quantity (or total value) of a good that may be imported during some period of time
Average Tax Rate (ATR)  Total taxes paid divided by total income 
marginal product of labor (MPL) the additional quantity of output produced when there is one additional unit of labor
 
change in quantity of output/change in quantity of labor
 
MPL = ΔQ/ΔL
economic profit < 0 revenue < opportunity cost - value elsewhere
 
-firms exit
Intermediate Products All outputs that are used as inputs by other producers in a further stage of production
Corporate Income Tax A tax levied on the net income (accounting profit) of corporations.
Economic bad any itme for which we would pay to have less
Price Elasticity of Suppy A measure of the responsiveness of the quantity supplied to changes inprice; computed by dividing the percentage change in quantity supplied by the percentage change inprice.
Circular Flow of Economic Activity the economic flow of money between households, businesses, and government.
Marginal Rate of Substitution (MRS) the slope of an indifference curve, which represents the rate at which a consumer would be willing to trade off one good for another.
Change in Demand A change in the quantity demanded of a good or service at every price; a shift of the demand curve to the left or right.
marginal rate of transformation the amount of 1 good that must be given up to produce 1 additional un. of another good
In a competitive market, price is.... equal to demand and is perfectly elastic (horizontal line)
How do you calculate the marginal utility per dollar for a good? you must divide the marginal utility of the good by its price in dollars
 
MUx/Px (marginal utility per dollar spent on x)
2 properties of an ordinary good 1. consumer requires more of 1 good to compensate for another good2. consumer experiences a diminishing marginal rate of sub. when substituting 1 good for the other
What will cause a shift of the PPC outward  
nThere is an increase in resource supplies
nAdvances in technology arise