econ terms

econ terms - Reservation Price of Activity X the price at...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Reservation Price of Activity X – the price at which a person would be indifferent between doing x and not doing y Marginal Cost – The increase in total cost that result from carrying out one additional unit of an activity Marginal Benefit – the increase in total benefit that results from carrying out one additional unit of an activity Average Cost – the average cost of undertaking n units of an activity is the total cost of the activity divided by n Average Benefit – The average benefit of undertaking n units of an activity is the total benefit of the activity divided by n External Cost of an Activity – a cost that falls on people who are not directly involved in the activity Normative Question – a question about what policies or institutional arrangements lead to the best outcomes (Involves Values) Positive question – a question about the consequences of specific policies or institutional arrangements (what economics answers) Market – the buyers and sellers of a good or service Real price of a product – its price relative to the prices of other goods and services Law of Demand – the empirical observation that when the price of a product falls, people demand larger quantities of it Law of Supply – The empirical observation that when the price of a product rises, firms offer more of it for sale Excess Supply – the amount by which quantity supplied exceeds quantity demanded Excess Demand – the amount by which quantity demanded exceeds quantity supplied Price Ceiling – Level above which the price of a good is not permitted by law to rise Price Floor – a minimum price for a good, established by law, and supported by governments offer to buy the good at that price Rationing function of price – the process whereby price directs existing supplies of a product to the users who value it most highly Allocative function of price – the process whereby price acts as a signal that guides resources away from the production of goods whose prices lie below cost toward the production of good whose prices exceed cost Determinants of Demand – Income, Tastes, Prices of Subs and Compliments, Expectations, Population Determinants of Supply – Technology, Factor Prices, Number of Suppliers, Expectations, Weather Bundle – A particular combination of two or more goods Budget Constraint – the set of all bundles that exactly exhaust the consumer’s income at given prices. Also called the budget line. Affordable Set – bundles on or below the budget constraint; bundles for which the required expenditure at given prices is less than or equal to the income available. Composite good – In a choice between a good X and numerous other goods, the amount of money the consumer spends on those other goods. Preference Ordering – a scheme
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/20/2008 for the course ECON 103 taught by Professor Shackelford during the Spring '08 term at Bucknell.

Page1 / 2

econ terms - Reservation Price of Activity X the price at...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online