Shift
Name all shifters of Demand
What is the definition of opportunity cost?
The value of the next best alternative foregone
What does the law of demand state
When price decreases, quantity demanded increases, and vice versa.
What are the four main types of market structures?
Perfect competition, monopolistic competition, oligopoly, monopoly.
Profit Maximization
MR = MC
Name all shifters of supply
Input costs, technology, taxes and subsidies, expectations, # of sellers, and prices of alternative goods.
Explain the difference between a command economy and a market economy.
Command economy is government-controlled; market economy is driven by individual decisions and market forces.
What is the difference between normal goods and inferior goods?
Normal goods' demand increases with income, while inferior goods' demand decreases. Or negative and positive coefficients.
How does diminishing marginal returns affect a firm’s costs in the short run?
Diminishing marginal returns make it more expensive to produce each additional unit, causing the firm’s marginal cost to rise in the short run.
Percentage Change
New - Old/Old
A leftward shift in supply, and a rightward shift in demand, what would happen to Price and Quantity
P - Increase
Q - ?
How does the concept of marginal utility relate to consumer decision-making?
Consumers allocate resources to maximize total utility, stopping when marginal utility equals price.
Explain how a change in the price of a substitute good affects demand
If a substitute's price rises, demand for the good increases; if it falls, demand decreases.
What are price takers
Firms that must accept the market price because they cannot influence it.
cross price elasticity
XED=% Change in Price of Good B/% Change in Quantity Demanded of Good A
Change in VC, would shift what in our production cost graph?
ATC, MC, AVC
Name All shifters for PPC
Why do price floors lead to surplus, and price ceilings lead to shortages
Price floors set above equilibrium cause excess supply; price ceilings set below equilibrium cause excess demand.
How does the entry and exit of firms ensure zero economic profit in the long run under perfect competition?
When firms earn economic profit, new firms enter the market, increasing supply and driving prices down until profits reach zero.
Profit Equation
Profit=TR−TC
Product X is in a perfectly competitive market and in long-run equilibrium, the price of a substitute decreases what would happen to the firm's production cost graph, and what would happen to product X's market?
Market:
Demand would shift left.
Firm:
Decrease MR.
Out of Long-run equilibrium.
operating at a Loss.
Explain how the concept of comparative advantage influences international trade.
Nations trade based on their ability to produce goods at a lower opportunity cost, benefiting all parties.
Describe how the concept of elasticity impacts a producer’s surplus when prices change.
If supply is inelastic, producer surplus increases significantly with price increases. If supply is elastic, producer surplus increases less because more output is required, raising costs.
Describe why allocative efficiency is achieved in perfectly competitive markets and what it means for consumers.
Allocative efficiency is achieved because firms produce at a level where price equals marginal cost (P = MC),
where did Mr. Jay teach in Colombia?
Colegio Jorge Washington in Cartagena and Colegio Bureche in Santa Marta