FSU Hammock Micro Exam 1 (1).

FSU Hammock Micro Exam 1
Height of demand curve - ANS-the maximum price consumers are willing to pay for an
additional unit

Diminishing Marginal Utility - ANS-falling additional usefulness

Consumer Surplus - ANS-The difference between what a consumer is willing to pay, and what
they actually pay

Market Demand - ANS-The horizontal sum of individual demand curves

Height of the supply curve - ANS-the minimum price that sellers are willing to accept to supply
an additional unit

Producer surplus - ANS-Difference between the price of a unit of output and its marginal costs

Market Supply - ANS-The horizontal sum of individual supply curves

Efficiency - ANS-Equilibrium is efficient
If there's no way to make total surplus bigger, you've got efficiency
Marginal Benefit equal marginal cost
Every unit that is produced has a benefit to consumers that is greater than the cost of
production
Total surplus maximized

Pareto Efficiency - ANS-There is no reallocation of resources that makes someone better off
without making anyone worse off

Own Price elasticity of demand - ANS-A measure of responsiveness of quantity demanded of
good X to a change in the price of good X.
[ΔQ / ΔP] X [littleΔP / littleΔQ]
"A 1% increase in price causes a 0.2% decrease in quantity demanded"

Classifying Own-price elasticity of demand:
If e>1... - ANS-we say that demand is elastic

Classifying Own-price elasticity of demand:
If e<1... - ANS-we say that demand is inelastic

Classifying Own-price elasticity of demand:
If e=1... - ANS-we say that demand is unit-elastic