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| | <br>elastic demand | | <br>elastic demand |
| | <br>inelastic demand | | <br>inelastic demand |
| − | <br>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)
| |
| | <br>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) |
| − | <br>(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)
| |
| | <br>marginal revenue (MR) | | <br>marginal revenue (MR) |
| | <br>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) |
| | <br>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
| + | <br>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
| |
| | <br>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) |
| | <br>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) |
| − | <br>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)
| |
| | <br>income effect | | <br>income effect |
| | <br>substitution effect | | <br>substitution effect |
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| | <br>accounting profit (total revenue minus explicit cost) | | <br>accounting profit (total revenue minus explicit cost) |
| | <br>economic profit (total revenue minus both explicit and implicit costs) | | <br>economic profit (total revenue minus both explicit and implicit costs) |
| − | <br>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)
| |
| | <br>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 |