Microeconomics final studying

PPF bows outward because

PPF bows outward because

Opp cost increases as goods increase

An effective price floor imposed on a product results in

Set above the equilibrium results in surplus, with quantities supplied exceeding quantity demanded

Resource

Negetive relation for supply

Technology

Positive relation for supply

Price expectations of sellers

Negetive relation for supply

Income

Positive relation for demand

Tastes

Positive relation for demand

Price of subsitute

Positive relation for demand

Price complement

negative relation for demand

Price exectation

Positive relation for demand

An effective price ceiling results in

Quantity demanded exceeding quantity supplied resulting in a shortage because it is below equilibrium price

Relatively price elastic

Is flatter and an increase in price will reduce total revenue since price effect is smaller than quantity effects. E>1

Relatively price inelastic

E<1. Big price effect and small quantity effect

Perfectly inelastic

E=0

Perfectly elastic

E=infinity

Unitary elastic

E=1

Lots of sunsitutes

Relatively elastic dermand

Few subsitutes

Relatively inelastic

Very inexpensive

Relatively inelastic

Very expensive

Relatively elaastic

Short run

Relatively inelastic

Long run

Relatively elastic

Income elasticity luxury

Greater than 1

Income elasticity necessity

Less than 1

cross price elasticity complement

Negative number

Cross price elasticity subsitute

Positive number

Cross price elasticity unrelated good

0

Pb=

Ps+tax

Ps=

Pb-tax

MU/Px>MU/Py

Increase quantity of x and decrease quantity of y

MU/Pxx=MUpy

Keep same

Accounting profit calc

TR-Explicit=accounting profit

economic =

accounting profit-implicit cost

Firm

TR, explicit, accounting profit, implicit, economic profit

TVC=

PL*L

TC=

TFC+TVC

ATC=

TC/q

economics of scale

downward sloping

diseconomics of scale

upward sloping

if price of good rises

the budget line will get steeper

LRAC is unattainable

at points below the curve

In a perfectly competitive firm

P=MR

IF MR>MC

Increase Q

TR=

P*Q

Dominant game theory strategy

Firm x charge $4 and Firm y charge $4

The more elastic demand

pays less

in a monopoly

firm demand is demand curve

If MR<MC

decrease q

Kinked demand curve theory of oligopoly

less elastic demand curve at price more than current price, since rivals match price reduction

kinked demand curve order

they dont match at first, then match later at the more inelastic part

contribution

MR-MC

If all returns to a resource is economic rent than we know that

Market supply is perfectly inelastic

if a monopolist curve in the output market and a perfectly compeitive farm in labor market, we know that the profit maximizing amount of labor the

Value of MP is grater than the MRP

income effect

at lower wages if money increases work decreases and leisure increases

Substitution effect

at higher wages if wage increases work increases and leisure decreases

For long run equilibrium cost of Monopolistically vs perfectly compeitive the former price is

higher and output is smaller

Profit monopsomist chooses

where demand=MC, the higher line. W1, Q2

for a minimum LRAC to be reached

Output has to be less than quantitiy

diseconmics of scales is reflected by

long run average cost being positive sloped

capital

machines or other things used to produce other goods

two things needed to have a cost function

input prices and production function

labor productivty

Labor positive relation demand

labor price of substitute resource

labor positive relation demand

taste for work vs leisure

labor positive relation supply

none wage income

labor negative relation supply

VMP

P*MP

MRP

MR*MP or same in perfect comp

MRC

Change in TR/Change in W or We in perfect comp

min LRAC of 4

oligopoly

Natural monopoly

when output is larger than Q