ECO Exam 3
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14 Terms
income elasticity of demand
the percentage change in demand given a percentage change in income
elastic
a 1% change in income leads to a greater than 1% change in demand
cross price elasticity of demand
the percentage change in demand for good A due to a price change or a percentage change in the price of b
elasticity of supply
the percentage change in quantity supplied given a percentage change in price
economic agent
rational - only do things that will make us better off
self interested - care about ourselves and what makes us happy
altruism
we do nice things to benefit others
utility
the satisfaction we get from consuming and getting things
total utility
how happy are you consuming a bundle of goods
marginal utility
addition utility from an additional unit of the good
rational spending rule
MUx/Px = MUy/Py
short-run
one input is fixed, but the other can chang
long run
all inputs can change
marginal productivity of labor
the additional output from an additional unit of labor
marginal cost
the additional cost producing an additional unit of the good