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Econ 101 - Midterm 1

Terms

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Decide how much to consume of each available product, given income & prices
Consumers
Economic Agents who decide how much to produce given its resources
Firms
Measure of sensitivity of demand to changes in price
Elasticity
When you totally satisfy both the supplier and cunsumer
Market Equilibrium
When |E| = 1
Unitary Elasticity
When |E| greater than 1
Elastic
When |E| is less than 1
Inelastic
Formulate a theory of individual behavior
Consumer theory
What individuals want
Consumer preferences
What individuals can do
Budget Constraints
What individuals can actually do
Consumer Choice
Showing the indifference of two products
Utility
amount of one good a consumer is willing to give up for one more of the other
Marginal Rate os Substitution
Where MRS is not equal to the slope
Corner Solution
relates quantity of a good consumed compared to income
Engel Curve
Change in consumption of a good associated with a change in its price, with level of utility held constant
Substitution Effect
change in consumption of a good resulting from increase in purchasing power with relative prices held constant
Income Effect
when the income effect is so strong the total effect ends up negative (like irish potato famine)
Giffen Goods
Difference between what a consumer is willing to pay for a good, and the amount actually paid
Consumer Surplus
If increase of price of one leads to increase in quantity demanded of the other
Substitutes
if increase in price of one good leads to decrease in quantity demanded of the other
Complemets
Curve tracing the utility-maximizing combinations of hte two goods as the price of one changes
Price Consumption Curve
Curve that relates the quantity of a good that a single consumer will buy to its price
Individual Demand Curve

Deck Info

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