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| | microeconomics (the study of individual “micro” market decisions, companies, consumers) | | microeconomics (the study of individual “micro” market decisions, companies, consumers) |
| − | P (price) & Q (quantity or output) | + | <br>P (price) & Q (quantity or output) |
| − | graphing supply and demand curves (with P on y-axis, and Q on x-axis) | + | <br>graphing supply and demand curves (with P on y-axis, and Q on x-axis) |
| − | supply meets demand: this defines the market price and quantity in a free, competitive market | + | <br>supply meets demand: this defines the market price and quantity in a free, competitive market |
| − | scarcity: wants exceed free availability. Scarcity is what makes economics meaningful. | + | <br>scarcity: wants exceed free availability. Scarcity is what makes economics meaningful. |
| − | opportunity cost | + | <br>opportunity cost |
| − | transaction cost | + | <br>transaction cost |
| − | rational economic action | + | <br>rational economic action |
| − | utility | + | <br>utility |
| − | net benefits | + | <br>net benefits |
| − | equilibrium | + | <br>equilibrium |
| − | firm = company = supplier = seller | + | <br>firm = company = supplier = seller |
| − | marginal benefit of a firm’s output decision: | + | <br>marginal benefit of a firm’s output decision: |
| − | for producing one more Q: marginal benefit is P (price it is sold at)
| + | :for producing one more Q: marginal benefit is P (price it is sold at) |
| − | monopoly | + | <br>monopoly |
| − | price discrimination | + | <br>price discrimination |
| − | Law of Demand: when price goes up, then demand goes down. YOU MUST USE THIS LAW. | + | <br>Law of Demand: when price goes up, then demand goes down. YOU MUST USE THIS LAW. |
| − | supply side | + | <br>supply side |
| − | demand side | + | <br>demand side |
| | | | |
| | '''Intermediate:''' | | '''Intermediate:''' |
| | | | |
| | substitutes | | substitutes |
| − | complements | + | <br>complements |
| − | fixed costs (FC) (these are costs that do not vary with a company’s output. E.g., rent payments) | + | <br>fixed costs (FC) (these are costs that do not vary with a company’s output. E.g., rent payments) |
| − | variable costs (VC) (costs that do vary directly with output. E.g., fuel, labor) | + | <br>variable costs (VC) (costs that do vary directly with output. E.g., fuel, labor) |
| − | average total cost (ATC) (this is all the costs divided by the quantity of output Q) | + | <br>average total cost (ATC) (this is all the costs divided by the quantity of output Q) |
| − | average variable costs (AVC) (total variable costs divided by the quantity of output Q) | + | <br>average variable costs (AVC) (total variable costs divided by the quantity of output Q) |
| − | total costs (TC = TVC + TFC) | + | <br>total costs (TC = TVC + TFC) |
| − | elastic demand | + | <br>elastic demand |
| − | inelastic demand | + | <br>inelastic demand |
| − | price elasticity of demand (percent change in quantity demanded | + | <br>price elasticity of demand (percent change in quantity demanded |
| − | divided by percent change in price, dropping the negative sign)
| + | :divided by percent change in price, dropping the negative sign) |
| − | marginal cost (MC = change in total cost (TC) due to producing one more unit of output Q) | + | <br>marginal cost (MC = change in total cost (TC) due to producing one more unit of output Q) |
| − | (note: total fixed costs (TFC) do not change as more is produced, thus MC = change in | + | <br>(note: total fixed costs (TFC) do not change as more is produced, thus MC = change in |
| − | TVC due to one more output Q)
| + | :TVC due to one more output Q) |
| − | marginal revenue (MR) | + | <br>marginal revenue (MR) |
| − | short run (period when only some inputs are increased in order to increase output; e.g. overtime) | + | <br>short run (period when only some inputs are increased in order to increase output; e.g. overtime) |
| − | long run (period when any and all inputs are increased to increase output; e.g., build new stadium) | + | <br>long run (period when any and all inputs are increased to increase output; e.g., build new stadium) |
| − | alternative definition of the “long run”: enough time to adjust all inputs in order to
| + | :alternative definition of the “long run”: enough time to adjust all inputs in order to |
| − | produce a given Q at the lowest possible cost
| + | :produce a given Q at the lowest possible cost |
| − | variable inputs (inputs that are increased to produce more Q in the short run) | + | <br>variable inputs (inputs that are increased to produce more Q in the short run) |
| − | fixed inputs (inputs that cannot be increased in the short run to produce more Q) | + | <br>fixed inputs (inputs that cannot be increased in the short run to produce more Q) |
| − | returns to scale (increasing, decreasing or constant? Look at whether output Q increases for | + | <br>returns to scale (increasing, decreasing or constant? Look at whether output Q increases for |
| − | increase in input I)
| + | :increase in input I) |
| − | income effect | + | <br>income effect |
| − | substitution effect | + | <br>substitution effect |
| − | inferior good (a good that sees a decrease in demand when income increases, and vice-versa) | + | <br>inferior good (a good that sees a decrease in demand when income increases, and vice-versa) |
| − | marginal product (increase in output due to additional input: Q = sum MP) | + | <br>marginal product (increase in output due to additional input: Q = sum MP) |
| − | barriers to entry | + | <br>barriers to entry |
| − | oligopoly | + | <br>oligopoly |
| − | law of diminishing marginal return | + | <br>law of diminishing marginal return |
| − | perfect competition (know the conditions for it) | + | <br>perfect competition (know the conditions for it) |
| − | economic point at which firms sell their goods (where MR=MC) | + | <br>economic point at which firms sell their goods (where MR=MC) |
| − | accounting profit (total revenue minus explicit cost) | + | <br>accounting profit (total revenue minus explicit cost) |
| − | economic profit (total revenue minus both explicit and implicit costs) | + | <br>economic profit (total revenue minus both explicit and implicit costs) |
| − | natural monopoly (a company that has increasing economies of scale, such that long-run average | + | <br>natural monopoly (a company that has increasing economies of scale, such that long-run average |
| − | costs of production decrease, like power companies or railroads)
| + | :costs of production decrease, like power companies or railroads) |
| − | In a perfectly competitive market ... | + | <br>In a perfectly competitive market ... |
| − | the increase in profit from an additional Q = P - MC
| + | :the increase in profit from an additional Q = P - MC |
| − | the firm increases Q only if P > MC
| + | :the firm increases Q only if P > MC |
| − | the optimal level of Q is where P = MC
| + | :the optimal level of Q is where P = MC |
| − | the company stays in business in the short run at level Q only if P equals or exceeds AVC
| + | :the company stays in business in the short run at level Q only if P equals or exceeds AVC |
| − | otherwise the company changes Q until it equals or exceeds AVC
| + | :otherwise the company changes Q until it equals or exceeds AVC |
| − | if no such Q exists then the company is better off shutting down
| + | :if no such Q exists then the company is better off shutting down |
| − | In a natural monopoly, there is falling ATC and MC, so ATC > MC. | + | <br>In a natural monopoly, there is falling ATC and MC, so ATC > MC. |
| − | A monopoly shuts down in the short run if when MR = MC, AVC > P. | + | <br>A monopoly shuts down in the short run if when MR = MC, AVC > P. |
| − | A monopoly shuts down in the long run if when MR = MC, ATC > P. | + | <br>A monopoly shuts down in the long run if when MR = MC, ATC > P. |
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| | '''Honors:''' | | '''Honors:''' |