Economics 115 Final- Yale Verified

Economics 115 Final- Yale Verified opportunity cost ️️the value of a resource/good in its "next best use". For example, the opportunity cost of completing a problem set is the time that you would otherwise allocate to, e.g., watching a Yale football game. The opportunity cost of an emotional connection may be the time and effort that you would otherwise invest in an alternative emotional connection. (ON LAST/PAST YEARS EXAM 3X KNOW) law of demand ️️as the price of a good increases, consumers' demand for that good should decrease complement good ️️a good that is purchased and used in combination with another good; when the price of this good goes up the quantity demanded of the complement goes down inferior good ️️goods that become less demanded as income increases consumer surplus ️️the buyers' benefit of being in the market, the total willingness to pay minus the amount that is actually paid by the consumer market equilibrium ️️quantity supplied equals quantity demanded Diminishing returns ️️Within a firm, diminishing marginal returns implies increasing marginal opportunity costs of production as output rises. When some input is fixed (say land or capital) and a firm adds more of other inputs (say fertilizer or labor) to increase production, a point will be reached when additions of the input yield progressively smaller, or diminishing, increases in output. substitute good ️️a good that can be used in place of another good demand curve ️️the relationship between the quantity of a good that is demanded and the good's price holding all other factors constant (q=a-bp) supply curve ️️the relationship between the quantity supplied of a good and the good's price, holding all other factors constant surplus ️️the amount by which quantity supplied exceed quantity demanded when market price is higher than the equilibrium price shortage ️️the amount by which quantity demanded exceeds quantity supplied when market price is lower than the equilibrium price price elasticity of demand ️️the percentage change in quantity demanded resulting from a 1% change in price elastic ️️a price elasticity with an absolute value greater than 1 inelastic ️️a price elasticity with an absolute value less than 1 unit elastic ️️a price elasticity with an absolute value of 1 perfectly inelastic ️️price elasticity of 0 meaning there is no change in quantity demanded or supplied for any change in price perfectly elastic ️️price elasticity of infinity meaning any change in price leads to an infinite change in quantity demanded or supplied producer surplus ️️the difference between the price at which producers are willing to sell their good or service and the price they actually receive price ceiling ️️a price regulation that sets the highest price that can be paid legally for a good or service deadweight loss (DWL) ️️the reduction in total surplus that occurs as a result of a market inefficiency price floor ️️a price regulation that sets the lowest price that can be paid legally for a good or service tax incidence ️️who actually pays the tax subsidy ️️a payment by the government to a buyer or seller of a good or service utility ️️measure of how satisfied a consumer is marginal utility ️️the additional utility a consumer receives from an additional unit of a good or service marginal rate of substitution (MRS) ️️the rate at which a consumer is willing to take off one good (the good on the x-axis) for another good (the good on the y-axis) and still be left equally well off ( = (change in y)/(change in x)= MUx/MUy (the slope of the indifference curve)) perfect substitute ️️a good that a consumer can trade for another good and receive the same level of utility, indifference curves are straight linear lines perfect complement ️️a good whose utility level depends on its being used in a fixed proportion with another good (car and tires), indifference curves are L-shaped budget constraint ️️a curve that describes the entire set of consumption bundles a consumer can purchase when spending all income income effect ️️the change in a consumer's consumption choices that results from a change in the purchasing power of the consumer's income