| A | B |
|---|
| percentage change in the quantity demanded caused by a 1% change in the price | price elasticity of demand |
| The price elasticity of demand coefficient is always negative or positive? | negative |
| If Ed > 1, then demand is | elastic |
| If Ed < 1, then demand is | inelastic |
| If Ed = 1, then demand is | unit elastic |
| If demand is ______ consumers are very sensitive to changes in price. | elastic |
| If demand is _____, a change in price produces a relatively smaller change in the quantity demanded. | inelastic |
| Necessities have _______ demand. | inelastic |
| a 1% change in price produces a 0% change in the quantity demanded. | perfectly inelastic demand |
| a 1% change in price produces an infinate change in quantity demanded | perfectly elastic demand |
| If demand is elastic, an increase in price causes a ______ in total revenue. | decrease |
| 4 determinants of demand elasticity | 1. The degree wo which a good is a necessity. 2. Number of available substitutes. 3. Proportion of consumer's total income spent on good. 4. time |
| The greater the proportion of the consumers income spent on a good, the more _____ the demand will be. | elastic |
| the percentage change in demand caused by a 1% change in income | income elasticity of demand |
| If income elasticity is greater than 0, then it is a ______ good. | normal |
| If income elasticity of demand is less than zero, it is an ______ good. | inferior |
| the percentage change in demand for one good caused by a 1% change in the price of another good | cross-price elasticity of demand |
| If the cross-price elasticity of demand is greater than zero, then the two goods are | substitutes |
| If the cross-price elasticity of demand is less than zero, the goods are | complements |
| the percentage change in the quantity supplied caused by a 1% change in price | price elasticity of supply |
| If the price elasticity of supply is greater than 1, then supply is | elastic |
| If the price elasticity of supply equals 1, then supply is | unit elastic |
| the study of who bears the tax burden of a tax | tax incidence |
| If the price elasticity of demand is less than the price elasticity of supply, who bears a greater portion of the tax burden? | consumers |
| If tax is perfectly inelastic, ______ will bear complete tax burden. | consumers |
| the satisfaction or pleasure that an individual receives from consuming a good or service | utility |
| additional satisfaction that an individual receives from consuming one or more unit of a good | marginal utility |
| marginal utility is always ______ sloping | downward |
| the extra satisfaction of a good or service declines as more units of the good are consumed | law of diminishing marginal utility |
| a condition in which total utility cannot be increased by spending more of a given budget on one good and less on another | consumer equilibrium |
| change in quantity demanded caused by a change in real income or purchasing power | income effect |
| change in quantity demanded caused by the change in price relative to the price of substitutes | substitution effect |
| out-of-pocket expenditures that require a specific payment by the firm to an entity outside the firm | explicit costs |
| costs that do not require a specific payment by the firm | implicit |
| a period of time in which at least one input in the production process is fixed | short run |
| all inputs are variable in the ____ run | long |
| physical plants, machinery, and equipment used to produce other goods | capital |
| the maximum amount of output that can be produced with various quantities on input | production function |
| change in total output caused by a change in labor while holding all other inputs used int he production process constant | marginal product of labor |
| add more and more of a variable input to a fixed input the marginal productivity of the variable input falls | diminishing marginal productivity |
| Why does the marginal cost curve intersect both the short run variable cost curve and the short run total cost curve at their minimum points? | marginal average rule |
| if the marginal cost is below average, the average will ____ | fall |
| Why are marginal cost curves, average variable cost curves, and the average total cost curves U-shaped? | because of the law of diminishing marginal productivity |
| production _____ when there is a division of labor | increases |
| traces the lowest cost per unit at which a firm can produce any level of output given that the firm can build any desired plant size | long-run average cost curve |
