Chapter 3
This occurs when the quantity supplied exceeds the quantity demanded at a given price.
What is excess supply (a surplus)?
This type of good sees demand rise when consumer income rises.
What is a normal good?
The relationship that shows the maximum output a firm can produce from given combinations of inputs.
What is the production function?
If demand increases and supply decreases simultaneously, this effect on equilibrium price is certain, while the effect on equilibrium quantity is uncertain.
What is an increase in price?
If two goods have a negative cross-price elasticity of demand, they are considered this.
What are complements?
If doubling all inputs results in less than double output, the firm is experiencing this type of returns to scale.
What are decreasing returns to scale?
A government imposes an ad valorem tax. Instead of shifting supply upward by a constant amount, the supply curve changes in this specific way.
It rotates (pivots) upward because the tax is a percentage of price.
When the price of a good changes, this component of the total effect captures how consumption changes because purchasing power has changed, holding utility constant.
What is the income effect?
This curve shows all combinations of labor and capital that produce the same quantity of output.
What is an isoquant?