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Lecture 1

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pranitsingh524's version from 2016-09-07 19:45

Section

Question Answer
what are objectives?state the direction and rate to move current conditions towards meeting the goal statement
what is a constraint?clearly functionally proposed solution that is directly linked to a specific objective
what is elasticity?degree of responsiveness in supply or demand in relation to changes in price
what is the price elasticity of demand?measure of the relationship between a change in the quantity demanded of a particular good and a change in its price
what is the price elasticity of supply?measure of the quantity supplied of a good or service to a change in its price
what is inelasticity?insensitive to changes in price or income
what is price inelastic of supply and demand?the quantity demanded or supplied of a good or service is unaffected when the price of that good or service changes
what is a consumer?a person who purchases goods and services for personal use.
memorize

 

Economic Agents' Objective
Question Answer
what is an economic agent?A person, company etc. that has an effect on the economy of a country by buying, selling, or investing.
what do consumers want to maximize?utility (satisfaction)
what do firms want to maximize?profits
what do workers want to maximize?income & consumable goods
what do investors want to maximize?return on investments
memorize

 

Economic Agents' Constraints
Question Answer
consumer constraintincome
firms constraintinput costs, capacity
workers/laborers constraintstime
investors constraintmoney $$
All Costs are opportunity costs. What does this mean?a benefit that a person could have received, but gave up, to take another course of action. An alternative given up when a decision is made.
memorize

 

Marginal Analysis
Question Answer
what is another word for marginal analysis?incremental
what is the main thing to evaluate when it comes to marginal analysis?to evaluate the Marginal Benefit (MB) of an adjustment against the Marginal Cost (MC) of an adjustment
what do we do with objectives and constraints?we use it to analyze the market
what do economic agents adjust to meet objectives? list 3 examples. control variables; consumption of goods (consumers), production & prices (firms), hours worked (workers)
memorize

 

MB & MC
Question Answer
what is marginal benefits?Change in total benefits arising from a change in the control variable
what is MB's equation?deltaBenefit / deltaControl variable
What is marginal costs?Change in total costs arising from a change in the control variable, Q
what is MC's equation?deltaCost / deltaControl Variable
what is profit?difference b/w a benefit & cost
if benefit of margin > benefit costs, than what?you profit!
What does the equimarginal principle state (express with a simple equation)!MB=MC
memorize

 

Equimarginal principle
Question Answer
what does it mean when MB=MC?you've maximized net benefits
what does it mean when MB>MC?the last unit of the control variable increased benefits more than it increased costs.
what does it mean when MBthe last unit of the control variable increased costs more than it increased benefits.
memorize

 

Look @ slide 7-12

 

Implication

 

Question Answer
what does TR =?PQ
if P increases, and Q decreases what happens to TR?decreases
If P increases and Q is 0, what happens to TR?increases
if P increases were due to a tax, then things are?different
memorize
if P increases due to tax, h

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