SI session

Choke price

Maximum price a buyer will pay to purchase an item.

Comparative advantage

When one agent can produce a specific good with less opportunity cost than another agent.

Unit elastic

The point where the elasticity is 1.

Price ceiling

A price limit set below the market leading to a shortage.

Price floor

A price minimum set above the market leading to a surplus.

Positive statements

Facts that can be proven true or false.

Normative statements

Opinion statements about what should be happening or decisions that an agent should make.

Scarcity

Goods have value because they exist in limited quantity.

Externalities

Decisions made by one party that affect a market they are not involved in, such as taxes and subsidies.

Subsidies

Handing over money to grow the market.

Opportunity cost

Benefits that have been forgone in order to produce more of a different good.

PPF

Production possibilities frontier.

Law of supply

The curve is always upward sloping.

Law of demand

The curve is always downward sloping.

Producer surplus

The difference between sellers' willingness to accept and the current market price.

Cross price elasticity of demand

Responsiveness of how the change in the price of one good affects the quantity demanded of another good.

Absolute advantage

When one agent is more productive than another agent at a task.

Fixed cost

Supply side costs that are unaffected by the quantity supplied of the product.

Variable cost

Cost that is dependent on the quantity of what you are producing.

Perfectly inelastic demand

Demand curve is represented by a vertical line.

Nash equilibrium

A type of equilibrium in which no agent could be better off by making a different decision.

Diminishing marginal returns

Depletion of additional benefits, explaining the curved shape of a combined PPF.

Supply/demand schedule

Supply and demand curve in table format.

Income elasticity

The percentage change in quantity divided by the percentage change in income.

Optimization in differences

Focusing on change in marginal benefits is an optimization technique.

Pareto efficient market

A market with no externalities and no monopoly power where resources are allocated efficiently.

Cross price elasticity is negative

Indicates that the two goods are complements.