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econ final

# econ final - Marginal cost is the additional cost above the...

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Marginal cost is the additional cost above the costs you have already incurred. Sunk cost is the cost that has already been incurred and cannot be recovered. - Marginal benefit is the additional benefit above what you have already derived - Opportunity cost is the best alternative that we give up when we make a choice or a decision. - A production possibility curve is a curve measuring the maximum combination of outputs that can be obtained from a given number of inputs . - Output is a result of an activity. - Input is what you put into a production process to achieve an output. - The functions of PPC o Demonstrate the efficient and inefficient outputs with a production possibilities curve. o Productive efficiency – achieving as much output as possible from a given amount of resources – occurs at any point on the PPC. o Any point within the PPC represents inefficiency . o Any point outside the PPC is unattainable, given present resources and technology. - Shifts in the PPC o Society can produce more output if: Technology is improved, More resources are discovered. Economic institutions get better at fulfilling our wants. More output is represented by an outward shift in the PPC. - Comparative advantage is used to describe the opportunity cost of two products. o The producer who has a smaller opportunity cost of producing one good is said to have a comparative advantage in producing that good. - The Law of Demand:

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o Quantity demanded rises as price falls, other things constant. o Quantity demanded falls as price rises, other things constant. - Demand Curve is a graph of the relationship between the price of a good and the quantity demanded . - Quantity Demanded Versus Demand o Quantity demanded refers to a specific amount that will be demanded per unit of time at a specific price, other things constant. o Quantity demanded refers to a specific point on the demand curve. o A change in quantity demanded , caused only by a change in the price of the good itself, is shown by a movement along a demand curve - Normal good is the good that an increase in income leads to an increase in demand , other things constant. - Inferior good is the good that an increase in income leads to a decrease in demand , other things constant. - - Shift Factors of Demand o Shift factors of demand are factors that cause changes in demand (shifts in the demand curve). Society’s Income An increase in income will increase demand for normal goods. An increase in income will decrease demand for inferior goods. o Prices of Other Goods When the price of a substitute good falls, demand falls for the good whose price has not changed. When the price of a complement good falls, demand rises for the good whose price has not changed.
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econ final - Marginal cost is the additional cost above the...

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