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exam_2_micro_review[1]

exam_2_micro_review[1] - Ch20 Know the definitions marginal...

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Ch20. Know the definitions marginal and total utility.  Know the formula for both and be able to  calculate it.  Know what the law of diminishing returns is and how it’s illustrated.   Be able to  determine consumer optimum between two goods and their respective prices.  Be able to  apply the cost/benefit formula for consumer optimum: MUa/Pa = MUb/Pb.  Know what the  income and substitution effects are and how they affect consumer optimum. Ch21. Know the definition elasticity.  Know the two ways to measure: mid point :[( Q2-Q1)/(Q2+Q1)]  /[( P2-P1)/(P2+P1)]and point slope: (1/slope)*( P/Q).  Know how we determine elastic,  inelastic and unit elastic.  Know these three types of elasticity graphically. Know how elasticity affects total revenue (TR).  Raising prices lowers TR when demand is  elastic, but raises it if demand is inelastic.  Know the determinants of elasticity: time, 
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