Term
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Definition
| the enjoyment or satisfaction that people receive from consuming goods and services |
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Term
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Definition
| The change in total utility a person receives from consuming one additional unit of a good or service |
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Term
| Law of Diminishing Marginal Utility |
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Definition
| The principal that consumers experience diminishing additional satisfaction as they consume more of a good or service during a given period of time. |
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Definition
| the limited amount of income available to consumers to spend on goods and services |
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Definition
| The change in the quantity demanded of a good that results from the effect of a change in the price on consumer purchasing power, holding all other factors constant. |
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Term
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Definition
| The change in the quantity demanded of a good that results from a change in price making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power. |
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Term
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Definition
| The situation where the usefulness of a product increases with the number of consumers who use it. |
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Term
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Definition
| The study of situations in which people make choices that do not appear to be economically rational. |
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Definition
| The highest-valued alternative that must be given up to engage in an activity. |
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Term
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Definition
| the tendency of people to be unwilling to sell a good they already own even if they are offered a price that is greater than the price they would be willing to pay to buy the good if they didn't already own it. |
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Term
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Definition
| A cost that has already been paid and cannot be recovered |
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Term
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Definition
| A curve that shows the combination of consumption bundles that give the customer the same utility. |
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Term
| Marginal Rate of Substitution (MRS) |
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Definition
| the slope of an indifference curve, which represents the rate at which a consumer would be willing to trade off one good for another. |
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Term
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Definition
| the process a firm uses to turn inputs into outputs of goods and services |
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Term
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Definition
| A change in the ability of a firm to produce a given level of output with a given quantity of inputs |
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Term
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Definition
| The period of time during which at least one of the firm's inputs is fixed. |
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Term
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Definition
| the period of time in which a firm can vary all of its inputs, adopt new technology, and increase or decrease the size of its physical plant |
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Term
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Definition
the cost of all the inputs a firm uses in production. TC = FC + VC |
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Term
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Definition
| costs that change as output changes. |
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Term
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Definition
| costs that remain constant as output changes |
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Term
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Definition
| a cost that involves spending money |
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Term
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Definition
| a nonmonetary opportunity cost |
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Term
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Definition
| the relationship between the inputs employed by a firm and the maximum output it can produce with those inputs. |
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Term
| Marginal Product of Labor |
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Definition
| the additional output a firm produces as a result of hiring one additional worker |
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Term
| Law of Diminishing Returns |
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Definition
| the principle that, at some point, adding more of a variable input, such as labor, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline. |
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Term
| Average Product of Labor (APL) |
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Definition
the total output produced by a firm divided by the quantity of workers APL = Q/L |
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Term
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Definition
the change in a firm's total cost from producing one more unit of a good or service. MC = ΔTC / ΔQ |
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Term
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Definition
fixed cost divided by the quantity of output produced. AFC = FC / Q |
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Term
| Average Variable Cost (AVC) |
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Definition
variable cost divided by the quantity of output produced. AVC = VC / Q |
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Term
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Definition
the sum of the average fixed cost plus the average variable cost. ATC = AFC + AVC |
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Term
| Long-run Average Cost Curve |
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Definition
| a curve showing the lowest cost at which a firm is able to produce a given quantity of output in the long run, when no inputs are fixed. |
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Term
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Definition
| the situation when a firm's long-run average costs fall as it increases output. |
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Term
| Constant Returns to Scale |
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Definition
| the situation when a firm's long-run average costs remain unchanged as it increases output. |
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Term
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Definition
| the level of output at which all economies of scale are exhausted. |
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Term
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Definition
the situation when a firm's long-run average costs rise as the firm increases output.
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Term
| Perfectly Competitive Market |
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Definition
| a market that meets the conditions of (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market. |
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Term
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Definition
| a buyer or seller that is unable to affect the market price. |
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Term
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Definition
total revenue minus total cost Profit = TR - TC |
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Term
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Definition
total revenue divided by the quantity of the product sold AR = TR / Q |
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Term
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Definition
change in total revenue from selling one more unit of a product MR = ΔTR / ΔQ |
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