Microeconomics Exam Review Flashcards

These flashcards cover key concepts, definitions, and important terms from the microeconomics review lecture notes to help prepare for the exam.

Price Elasticity of Demand Coefficient

The measure of how much the quantity demanded of a good responds to a change in the price of that good.

Inelastic Demand

A situation in which the demand for a good is relatively unresponsive to changes in price.

Total Revenue Curve

A graphical representation of total revenue as a function of the quantity sold.

Marginal Utility

The additional satisfaction or benefit received from consuming one more unit of a good or service.

Diminishing Marginal Utility

The principle stating that as a person consumes more units of a good, the additional satisfaction obtained from each additional unit decreases.

Implicit Costs

Costs that represent lost opportunities when resources are used in a certain way instead of the next best alternative.

Explicit Costs

Direct, out-of-pocket payments made for the use of resources in production, such as wages and rent.

Economic Profit

Total revenue minus total costs, including both explicit and implicit costs.

Utility Maximization

The process consumers engage in to obtain the highest level of satisfaction possible given their budget constraints.

Perfectly Inelastic Demand

A situation in which the quantity demanded does not change regardless of price changes.

Normal Goods

Goods for which demand increases as consumer income rises.

Inferior Goods

Goods for which demand decreases as consumer income rises.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service versus what they actually pay.

Cross-Elasticity of Demand

A measure of how the quantity demanded of one good responds to a change in the price of another good.

Long-Run Supply Curve

A supply curve that shows the relationship between price and quantity supplied after all inputs can be adjusted.

Economies of Scale

Cost advantages that businesses obtain due to the scale of operation, with cost per unit of output generally decreasing with increasing scale.