SI session

Maximum price a buyer will pay to purchase an item- choke price

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 set below market- shortage

Price floor set above market- surplus

Positive- facts that can be proven true or false

Normative- opinion statements- what should be happening or decisions that an agent should make

Goods have value because they exist in limited quantity- scarcity

Decisions made by one party that affects a market they are not involved in such as taxes and subsidies- externalities

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- curve is always upward sloping

Law of demand- curve is always downward sloping

Producer surplus- sellers' willingness to accept and current market place

Cross price- Responsiveness of how change in the price of one good affect 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 are unaffected by the quantity supplied of the product

Variable cost- cost that is dependent on what you are doing or quantity of what you are producing

Perfectly inelastic price- demand curve is vertical line

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

Diminishing marginal returns- Depletion of additional benefits explains the curved shape of a combined PPF

Supply/demand schedule- supply demand curve in table format

Income elasticity- %change in quantity/% change in income

Optimization in differences- focusing on change in marginal benefits is an optimization in this

Pareto efficient market - no externalities, no monopoly power and no

Cross price elasticity of demand of two goods is negative - the two goods are complements