Econ

• The price multiplied by the quantity sold
• Unit-elastic means Total Rev doesn't change
• Inelastic means price and Total Rev move together
• Elastic means price and Total Rev move opposite

• % change in Quantity demanded/ % change in goods price
• If Positive, move in same direction so Substitute
• If negative, move down so know they are compliments

• Sensitity of quantity demanded to income
• If Positive, it is a normal good( demand increases when income rises)
• If Negative, it is an inferior good( demand decreases when income rises)

• % change in Quantity suplied/ % change in price
• Perfect Elastic Supply-Horizonal line
• Perfect inelastic supply- Vertical Line; Only have that amount no matter what they pay will still be same quantity.

• Availability of Inputs: large when there is lots available
• Time: More elastic the more time they have

Measure of the satisfaction the consumer derives from consumption of goods and services

Collection of all goods and services consumed by that individual

Total utility generated by the consumption bundle

• Change in total utlilty generated by consuming one additional unit of that good or service
• Increases by less each time

• Downward sloping
• It is the slope of total curve
• Rise over run: Change in Total utility/ Change in quantity

The additional satifaction a consumer gets from one more unit of a good or service declines as the amount of that good or service cosumed rises.

Cost of a consumers consumptionm bundle be no more than the consumers budget

Set of all consumption bundles that can be consumed given the consumer's income and the price

• Downward sloping line
• Top: B/P1
• Middle: the slope; -P2/P1
• Bottom: B/P1

• Consumption bundle that maximses cusomers total utlitiy given his or her budget constraint
• Slope of budget line and indifernce curve

• how much we get for one additonal of somthing else
• Marginal utility/price
• How much marginal utitly we get per dollar.

The change in quantity consumed as the consumer substitues the expensive good with a cheaper good.

• When prices changes, purchasing power changes
• Price goes down, more power

A dome shape because of diminishing marginal utility-joy of satisfaction

• Contour line that maps consumption bundles yielding the same amount of total utility.
• Incresaess to the NorthEast

• Never cross
• The farther out from origin, higher level of total utility
• Downward sloping
• They are convex because of diminishing marginal utitliy

• How much we must give up to get one more unit of the other
• Slope of indiference curve = slope of the budget line
• -P2/P1 = -MRS= -MU2/MU1

• Do I want it
• Can I afford it

Cause for the flattening of the indifference curves as you slide down themn to the right

• Consumer requires more of one good to conpensate for les of the other
• Consumer experiinnces a diminishing marginal rate of sustitutiko when subsitituing one good in place of the other.

• straight downward sloping lines
• Small price changes lead to large changes in consumption bundle

• When a consumer likes to consume two goods in the same ratio regardles of their price.
• These form a corner shape

Relationship between quantity of inputs a firm uses and the maximum quantity of output it produces

• An input whose quantity is fixed for a period of time and cannot be varied.
• Land, machines, buildings

Quantity can be changes at any time

• Time period in which al inputs can be varied
• Fixed costs are 0

Time period in which at least one input is fixed

Shows how quantity of output depends on the quantity of the variable input, for a given quantity of the fixed input.

• Slope of the Total curve
• Additional quantity of output that is producec by using one more unity of that input

Change in Quantity of output/ Change in quantity of labor

When an increase in the quaqntity of the input, holding the levels of all other fised, leas to a decline in marginal product of that input.

• Fixed cost plus variable cost
• Explicit + Implicit costs
• esplici: write a check
• implicit: opportunity cost

• Do not depend on the quantity of ouput produced
• Renting, heating

Depend upon quaqntiy of output of production

• Change in total cost/ Change in output
• You can just caculate change in variable cost on top since fixed doesn't change.
• Slope of total cost curve

• Total Cost/ Quantity of output
• TC/Q
• Tells how much the average or typical unit of output costs to produce.

• Average tells how much typical unit will cost
• Marginal tells how much one more unit will cost
• Marginl cost curve intersects ATC at it's lowest

• U-Shaped curves
• Fixed in the beginning and Variable on end

Fixed costs/ quantity of output

Variable Cost/ Qof output

• The larger the output, the great the quantity of output over which fixed costs is spread leading to lower fixed costs.
• Accounts for the sloping down of the U curve

• The larger the output, the greater the amount of variable input required to produce addional units leads to higher average variable costs.
• Accounts for the sloping up of U curve.

• Qunatity of output at which total cost is lowest.
• Bottom of the U-shaped average total cost curve
• At Min, ATC = Marginal Cost

• Relationship between output and average total cost when fixed cost has been choses to minimize average total cost for each level of output.
• Composite of a bunch of short run curves
• It is the lowest parf of all the short run Total cost curves

• The beginning of the curve LRATC
• When long run average total cost declines as output increases.
• Saying as we move larger, our ATC goes down

• When Long run average total cost increases as output increases.
• Eventually goes back up because it starts to cost more to get bigger

• The bottom lowest point
• It is the minimum scale needed to achieve the lowest average total cost in the long run.
• Minimum quantity

Producer whose actions have no effect on the market price of the good or service it sells

A consumer whose actions have no effect on the market price of the good or service he or she buys

Both consumers and producers are price takers

Industry inwhich producers are price-takers

• Many buyers and sellers and are all price takers
• The good must be a standardized product, known as a comodity
• No barriers to Entry or exit
• There is complete info, so every seller and buyer knows the market price

• Change in total revenue generated by an additional unit of output.
• This represents the price in Pure comp.
• Change in total rev/ Change in quantity of output
• Slope of total curve

Firm is profitable

Break even

Loss

Company should shut down so shut down price = AVC

Produce in short run

• Profit is maximized by producing the quantity at which the marginal reveune of the last unit produced is equal to its marginal cost.
• This is done by dividing units into small small pieces. can't always do.

• When the market price is below minimum average variable cost.
• The Minimum average variable cost is equalt to the shut-down price.

When the market price is greater than or equal to minimum average variable cost.

• When quantity supplied equals quantity demanded.
• Where the price equals average total cost at it's minimum

• MR = P
• This says we are producing the right amount

Price = ATC min which is cheepest we can get it in the long run

• When P = ATCmin
• The long run is always flatter because in short run there is not sufficient time to enter and exit where in long run there is time so you wont earn ecoomic profit

• Perfect competition
• Monopoly
• Oligopoly
• Monopolistic Comp

• Number of producers
• If the products are differenciated or not

• A single producer
• Selling a single undifferenciated product

• A few producers
• Can sell either identical or differenciated

Many producers each selling differenciated products

• Many buyers and sellers
• All selling differenciated products

• Ability to raise the price of a product
• Ex. Monoposlists can restrict the supply, which increases the price

• There are Barriers to entry
• Control of a scarce resource or input
• Increasing returns to scale
• Technological superiority
• Government created barries; patents, copyrights

When an increasing returns to scale provicde a large cosgt advangtae toa single firm that produces all of an industrys outputs

Downward sloping since it is the market demand curve

• Marginal Revenue=Marginal cost
• Marginal Revenue bisects the Market demand
• To find price, know market cost then go up to demand curve and over for price.

Curve is horizontal since it is purley elastic

Few sellers, relaxing the many sellers and bariers to entry

Relaxing the assumption of differenciated products