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Definition
| Given I and Py, the price consumption curve shows the welfar maximizing combination of x and y at each level of Px. |
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Definition
As Px decreases (increases), AOTBE, consumption of a giffen good will decrease (increase)
(Px goes down, Qdx goes down/ Px goes up, Qdx goes up) |
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Definition
| impact of a change in relative prices on the consumer's behavior |
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Definition
impact of a change in real income (purchasing power) on consumer's behavior
(as Px goes down, real income goes up) |
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Definition
| As real income goes up, Qx goes up |
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Definition
| As real income goes up, Qx goes down |
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Definition
-Parallel to the new budget constraint
-Tangent to the initial indifference curve |
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Definition
| Shows all possible allocations of 2 goods (x,y) between two people (A, B) |
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Definition
| Given current technology, the production function shows the physical relation between the firm's resource inputs and product output |
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Definition
| A period of time in which (at least) one input is fixed while the other inputs are variable ( k is fixed, L is variable) |
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| Long run (strategic planning) |
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Definition
| A period of time in which all inputs are variable |
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Term
| Total Product of labor Schedule |
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Definition
| Given capital and technology, the TPL shows the level of output at each level of labor use |
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| Marginal Product of Labor Schedule (MPL) |
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Definition
| Given capital and technology, the MPL is the change in output per unit change in labor use |
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Definition
| Alternative combination of labor and capital that yield the same level of OUTPUT |
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Term
Marginal Rate of Substitution between labor and capital
(MRTSLK) |
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Definition
| Given a unit change in labor, the (MRTSLK) is the change in capitalthat keeps output constant |
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Term
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Definition
| As L goes up, and K goes down, (MRTSLK) goes down |
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Term
| Income Elasticity of Demand |
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Definition
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Term
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Definition
| At any level of labor use, APL = the slope of a line from the origin to the corresponding point on the TPL schedule |
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Term
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Definition
| At any level of labor use, MPL = the slope of a line tangent to the corresponding point on the TPL schedule |
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Definition
| Negatively sloped portion of the isoquant between horizontal and vertical tangent points (B and C) |
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Definition
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Definition
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Term
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Definition
| given w and r, the isocost line shows the alternative combinations of labor and capital that have the same cost |
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Term
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Definition
to produce a given output at least cost, use capital-labor combination on the isoquant where MRTSLK= w
r |
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Term
| Output expansion path (OEP) |
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Definition
| given w and r, the output expansion path shows the least cost combination of labor and capital at each level of output |
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