Scarcity and Working Hours

Flashcards about Scarcity, Working Hours, and Microeconomics

Opportunity Cost

The value of the next best alternative when a decision is made. It's what is given up.

Economic Rent

Payments exceeding reservation price, the minimum you'd accept.

Comparative Advantage

Ability to produce at a lower opportunity cost than others.

Specialization

Focusing productive effort on one specific task

Production Functions

Mathematical function that relates the maximum amount of output that can be obtained from a given number of inputs

Isocost curves

A line that represents all combinations of inputs which cost the same total amount.

Indifference curve

A curve showing all the combinations of goods that give the consumer the same level of satisfaction or utility

Feasible Consumption Set

All possible combinations of goods that a consumer can afford given market prices and the consumer's income

Marginal Rate of Substitution (MRS)

The rate at which a consumer is ready to give up one good in exchange for another good while maintaining the same level of utility.

Budget Constraint

Represents all combinations of goods and services that a consumer may purchase given current prices within his or her given income.

Marginal Rate of Transformation (MRT)

The rate at which one good can be traded-off or transformed to another in a production process or market.

Convex Preferences

Indifference curves that are convex to the origin, indicating that people prefer mixes of goods rather than extremes.