Elasticities
Factors of production
Trade
Terms
Random
100
Demand is inelastic if the absolute value of the price elasticity of demand is
What is less than 1
100
What are the 4 factors of production
Land, Labor, Capital, Management
100
What are all the goods and services that we sell to foreign countries?
What are exports?
100
an increase in output produced by a nation and can be graphically depicted as an increase in the production possibilities of a nation.
What is Economic growth
100
Insulin would be an example of a _____ good?
What is Inelastic?
200
When the elasticity is equal to 1, it is _____
What is unit elastic?
200
What way can the production function be represented
what is table, equation, graph?
200
US trade usually runs on a _____ but US agriculture run on a _____
Deficit, surplus
200
if one raises price, consumers will go to someone else, more willing to walk away
What is Perfectly elastic?
200
What are some key differences between short run and long run
Short run- sometimes produce at minimum point, at least one fixed variable
Long Run- almost always produce at minimum point (where mc cross ATC, AVC) Can change everything
300
What are the 5 factors that determine price elasticity of demand, describe each one?
1. The Existence of Substitutes: The more substitutes that exist for a good, the more responsive consumers will be to a change in its price.
2. The Percentage of a Person’s Total Budget Devoted to the Purchase of that Good: The larger the percentage of your budget devoted to an item, the more price elastic its demand will be.
3. The Time Allowed for Adjustment: The longer the time allowed for adjustment to a price
change, the more that consumers will react.
• The longer any price change persists, the greater the elasticity of demand, other things held constant.
4. Necessity vs. Luxury: The more a person needs a good or service, the less elastic the item is.
(Diabetes drugs are inelastic and yachts are elastic) Factors that Determine the Price Elasticity of Demand (cont.)
5. Definition of the Market: How narrowly defined the market – the narrower the market, the more elastic demand
300
What is the equation used to find marginal product of labor?
What is ∆Q/∆L?
300
Why is trade important
It allows for specialization so countries can consume more than they would normally be able to produce.
300
The marginal product of an input declines as the quantity of the input increases (other things equal)
What is diminishing marginal product?
300
Which type of good would have an income elasticity of demand that is >1 and relatively large?
Luxuries
400
Using the midpoint formula calculate price elasticity of demand between $7 for 15 units demanded and $8 for 10 units demanded?
[(Q2-Q1)/((Q2+Q1))/2] / [(P2-P1)/((P2+P1)/2)]
[(10 – 15) / ((10 + 15) / 2)] / [(8 – 7) / ((8 + 7) / 2)] = [(-5 / 12.5) / (1 /7.5)]
= [-.4 / .133] = -3.00
400
What is the profit maximizing point?
What where MR=MC or where MR and MC are the closest but MR>MC
400
What is the difference between absolute and comparative advantage?
Absolute Advantage: The ability to produce more output from given inputs than other producers can
Comparative Advantage: can produce good or service at lower opportunity cost
400
sometimes produce at minimum point, at least one fixed variable
What is short run?
400
Chili can produce 5 thousand tons of coffee beans a year and 3 thousand pounds of chocolate, Brazil can produce 6 thousand tons of coffee beans and 5 thousand pounds of chocolate. Who has the comparative advantage in producing coffee?
Brazil 6 thousand tons of coffee / 5 thousand pounds of chocolate = 1 / .833
Brazil gives up .833 thousand pounds of chocolate for every 1 thousand ton of coffee
Chili 5 thousand tons of coffee/ 3 thousand pounds of chocolate = 1 / .6
Chili gives up .6 thousand pounds of chocolate for every 1 thousand ton of coffee.
Chili has the comparative advantage in producing coffee
500
USING THE MIDPOINT EQUATION FIND THE ELASTICITY OF DEMAND FROM POINT A TO B MIDPOINT FORMULA: ((Q2-q1)/(q2+q1)/2)/((P2-P1)/(P2+P1)/2
A(0,80) B(20,60)
What is -7 and elastic
500
MC should cross ____ and ____ at their minimum point?
What is ATC and AVC
500
Chili can produce 5 thousand tons of coffee beans a year and 3 thousand pounds of chocolate, Brazil can produce 6 thousand tons of coffee beans and 5 thousand pounds of chocolate. Who has the comparative advantage in producing Chocolate?
Brazil 6 thousand tons of coffee / 5 thousand pounds of chocolate = 1.2 / 1
Brazil gives up 1.2 thousand tons of coffee for every 1 thousand pound of chocolate
Chili 5 thousand tons of coffee/ 3 thousand pounds of chocolate = 1.7 / 1
Chili gives up 1.7 thousand tons of coffee for every 1 pound of chocolate
Brazil has the comparative advantage in producing Chocolate.
500
a graphical representation of the maximum combination of two goods or services that can be produced, given a fixed amount of resources and technology.
Production Possibilities Curve
500
If quantity changes from 4 to 6, the TC for 4units is 200, and MC = 75 what is the TC for 6 units.
What is 350?