Studied by 0 people
Brief summary of units 1 and 2 with unique ways to memorize terms and formulas.
Opportunity Cost
The most desirable alternative that is given up when making a choice.
Factors of Production
Land, Labor, and Capital used in the production process.
PPC (Production Possibilities Curve)
Illustrates the efficiency in producing two items, showing efficiency, inefficiency, and impossibility.
Constant Opportunity Cost
Represents a straight, downward sloping line on a PPC due to similar resource usage.
Increasing Opportunity Cost
Depicted as a curved line on a PPC due to the law of increasing opportunity costs.
Substitute
A product used as a replacement when the price of another product increases.
Complement
A product that decreases in demand when the price of another product increases.
Normal Good
Demand increases when income rises, indicating it's not a necessity.
Inferior Good
Demand decreases when income rises, suggesting it's a lower-quality product.
Elastic
Demand is sensitive to price changes, leading to more or less consumption.
Inelastic
Demand remains relatively constant despite price changes.
Price Ceiling
Maximum price set below equilibrium.
Price Floor
Minimum price set above equilibrium.
Shortage
Occurs when the price is below equilibrium, leading to excess demand.
Surplus
Occurs when the price is above equilibrium, leading to excess supply.
Consumer Surplus
Difference between what consumers are willing to pay and what they actually pay.
Producer Surplus
Difference between what producers are willing to sell for and what they actually sell for.
Equilibrium
Intersection point of supply and demand where efficiency is maximized.
Cross Price Elasticity of Demand
Measures the responsiveness of quantity demanded of one good to a change in the price of another good.
Income Elasticity
Measures the responsiveness of quantity demanded to a change in income.
Total Revenue Test
Determines if a product is elastic or inelastic based on the direction of total revenue changes.
Utility Maximizing Rule
Compares the satisfaction derived from a product to its price to determine the best option.
Note 
Flashcard (33)