Chapter 6 Elasticity
know the midpoint formula!
know the midpoint formula!
The % change is Quantity Demanded/% change in income is this
What is the income elasticity of demand calculation?
The utility maximizing combination of two goods is achieved when this occurs
What is equal marginal utility per dollar spent?
(or as close as possible)
In an anonymous survey people tend to rate themselves as above average in terms of intelligence. This is an example of the ________ effect.
What is the overconfidence effect?
Accountants overestimate __________ with the Revenue minus Expense only formula
What is net income/profit?
You elect to have 1/4 of you paycheck deposited to a savings account and the rest to your checking account.
What are pre commitments?
% change in Q supplied/% change in price is called this
What is the price elasticity of supply?
(Remember to use midpoint approach!)
Joe's total utility from 3 cans of Coke is 30. The first Coke yields 12 units of utility, the second 11 units, the third Coke _______________.
What is 7 units of utility?
I gained $500 and lost 200. I experience _________
change in my overall utility
What is no net change?
(we feel loss 2.5 times more than gains!)
An entrepreneur's potential earnings as a salaried worker is one of these
What are implicit costs?
A 10% price increase in good A leads to a 10% increase in the quantity demanded of Good B means these goods are ____________
What are substitutes?
A perfectly inelastic supply curve looks like this
What is vertical?
Sam spends all his money on cucumbers and watermelon. If the price of cucumbers falls this happens to the MU per dollar of cucumbers.
What is rise/increase?
These economists assume people are rational in their decision making
What is neoclassical?
The annual lease amount on a building is one of these
What are explicit costs?
Joe was convinced 1 hour studying for his Finance exam would be enough, when he started looking at his notes he realized he should have started earlier. Joe is a victim of __________ ___________
What is a planning fallacy?
What is increased revenue/profits?
If the MU of product A = 5 and the MU of product B =3, I should purchase ________ of A and _______ of B
What is more of A and less of B?
Behavioral economists believe people make
______________ _____________
What are systematic errors?
When economic profit (accounting profit - implicit profit) is greater than zero this will occur in the industry
What is firms will enter?
The tendency to only pay attention to information that agrees with ones preconceptions
What is confirmation bias?
Why does the Mona Lisa have a perfectly inelastic supply curve?
What is there is only one original?
This states that added satisfaction declines as an individual consumes additional units of a given product
What is the law of diminishing marginal utility?
You are given a mug which you would have paid $10 for. Due to this effect you will now only sell it if offered more than $10.
What is the endowment effect?
Change in total product/change in labor input is this
What is Marginal product?
People isolate purchases and fail to consider all consumption option when this occurs
What is mental accounting?
If the elasticity of demand is less than one it is this.
What is inelastic?
(so greater than one is elastic)
When the combination of goods purchased maximizes total utility we say _________ ____________ has been achieved
What is consumer equilibrium?
The dictator game and the ultimatum gave have proven evidence of ______________
What is fairness?
Marginal returns will _________ then _________ then become________________.
When one bases how good or bad they feel about a grade based on a reference point or context due to this
What are framing effects?