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Indifference Curve (IC)

A graph representing different combinations of two goods that provide equal satisfaction to a consumer.

Variable Cost

Costs that change with the level of output, such as baking supplies in a bakery.

Gourmet Popcorn Price

The price of gourmet popcorn set at $24.

Coffee Mug Price

The price of coffee mugs set at $20.

Marginal Utility

The additional satisfaction or utility gained from consuming an additional unit of a good.

Common Resources

Resources that are rival and nonexcludable, leading to potential overuse.

Elastic Demand

Demand is elastic when a change in price leads to a larger change in quantity demanded.

Public Good

A good that is nonexcludable and nonrival, meaning it can be consumed by one person without reducing availability to others.

Negative Externality

A cost incurred by a third party who did not agree to it, typically arising from the production or consumption of goods.

Positive Externality

A benefit received by a third party who did not pay for it, typically arising from the production or consumption of goods.

Coase Theorem

The theory that private parties can negotiate without cost over the allocation of resources to resolve externalities.

Income Elasticity

A measure of how much the quantity demanded of a good responds to changes in consumer income.

Short Run vs Long Run

The short run is a period in which at least one input is fixed, while in the long run all inputs can vary.

Cross Price Elasticity

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

Opportunity Cost

The cost of forgoing the next best alternative when making a decision.

Tragedy of the Commons

A situation in which individuals use a shared resource to the extent that demand overwhelms supply, causing the resource to deplete.

Accounting Profit

The difference between total revenue and explicit costs.

Economic Profit

The difference between total revenue and total economic costs (including explicit and implicit costs).

Cilantro's Marginal Utility

Given the dislike for cilantro, its marginal utility is likely negative.

Types of Goods

Goods can be classified as normal, inferior, elastic, inelastic, substitutes, or complements based on their demand response.

Firm's Profit Calculation

Profit can be calculated by subtracting total costs from total revenues.

Demand Elasticity Factors

Factors influencing elasticity include availability of substitutes, necessity vs luxury status, and proportion of income spent.

Pricing Decisions under Elasticity

If a product is elastic and its price increases, total revenue may decrease as quantity demanded drops.

Utilitarian Principle

The idea that a project should only proceed if the total benefits exceed the total costs.