A price floor is a legally established minimum price for a product, which inflates the price above the equilibrium price.
The Marginal Rate of Substitution (MRS) depends on how much extra utility a consumer gets from a little more of each good.
Minimizing expenditure subject to a utility constraint involves finding the lowest cost of achieving a certain level of utility while keeping utility constant.
The challenge involves determining how much compensation firms should offer workers to incentivize them to move, considering the costs and benefits of relocation.
A specific sales tax is a fixed amount charged per unit of a good or service sold, regardless of its price.
The demand function for a good or service describes the mathematical correspondence between quantity demanded for the good or service, its price, the prices of substitute and complementary products, consumers’ income, and other factors that influence demand.
The $2.40 specific sales tax collected from consumers will likely increase the price consumers pay for corn and decrease the quantity demanded.
A unit tax reduces the price received by producers by the amount of the tax collected.
A mathematical equation that represents the combinations of goods a consumer can purchase given their income and the prices of those goods.
The Twinkie tax refers to a specific application of taxation that targets certain goods, illustrating how taxes can influence consumer behavior and market dynamics.
If consumers refuse to buy GM crops, it can lead to a decrease in prices and quantities sold, impacting the overall market dynamics.
An Economic Model is a description of the relationship between two or more economic variables, which simplifies reality to make theoretical predictions that can be empirically tested.
Changing one of the things held constant (e.g., price of substitutes, and income) shifts the entire demand curve.
The question is whether firms' standard compensation packages overcompensate workers by paying them more than necessary to incentivize relocation.
Calculus is used to analyze small changes in demand and supply factors.
The assumption is that p c equals $3 per pound to simplify the equation.
The interior solution that maximizes utility without exceeding the budget constraint is referred to as Bundle e.
Impossible indifference curves refer to situations where one good is considered worse while another is considered better, leading to a contradiction in consumer preferences.
The decision to permit firms to grow and sell GM foods affects the supply and demand for food, potentially leading to lower prices and increased quantities sold.
Relative after-tax price refers to the price of a good in relation to another good, adjusted for taxes, which influences consumer choices based on affordability.
The equation for tax effects can be expressed as τ = (ηD - εS) / (ηD + εS), where τ represents the tax incidence, ηD is the elasticity of demand, and εS is the elasticity of supply.
Tax incidence on firms is calculated as the amount by which the price paid to firms rises, represented by the equation 1 - (dp/dτ).
Perfect Substitutes are goods that can replace each other in consumption, represented by flatter indifference curves at high quantities.
The Marginal Rate of Substitution (MRS) is the maximum amount of one good that a consumer will sacrifice to obtain one more unit of another good.
A graph showing different combinations of two goods that provide the same level of utility to a consumer.
Perfect substitutes are goods that a consumer perceives as identical in terms of utility, allowing them to be used interchangeably without any loss of satisfaction.
An ad valorem tax is a tax based on the value of a good or service, typically expressed as a percentage of the sale price.
Consumers maximize their well-being (utility) subject to their budget constraint.
A tax collected from producers shifts the supply curve back, indicating a decrease in supply at every price level.
The quantity demanded for coffee, Q, varies with the price of coffee, p, the price of sugar, ps, and consumers’ income, Y.
When the optimal bundle occurs at a point of tangency between the indifference curve and budget line, this is called an interior solution.
Utility refers to a set of numerical values that reflect the relative rankings of various bundles of goods.
Prices determine resource allocation by influencing decision-makers on which goods to produce, how to produce them, and who gets them.
The combination of goods that maximizes a consumer's utility given their budget constraint.
Market Equilibrium is the point where the demand and supply curves intersect, indicating that the quantity demanded equals the quantity supplied at a specific price.
At any price other than the equilibrium price, there will be either excess supply or excess demand.
A specific sales tax is a fixed amount charged per unit of a good or service sold, regardless of its price.
E-books accounted for 20% of trade books sold in the U.S., indicating a significant preference for digital formats among American consumers.
An indifference curve is the set of all bundles of goods that a consumer views as being equally desirable.
Preferences refer to the individual tastes and preferences that influence consumer choices and decisions.
Consumers maximize their well-being or pleasure from consumption subject to the budget and other constraints they face.
Economists strive to enhance their understanding of the world through the development of new theories.
A derivative is a measure of how a function changes as its input changes, representing the rate of change or the slope of the function at a given point.
Marginal utility is the extra utility that a consumer gets from consuming the last unit of a good, holding the consumption of other goods constant.
Elasticity is a measure of how much the quantity demanded or supplied of a good responds to changes in price or other factors, influencing the shape of demand and supply curves.
Goods that a consumer is completely indifferent between, meaning they can be substituted for one another without affecting overall utility.
Relative price differences can lead consumers to choose one good over another based on which is more affordable, influencing their consumption patterns.
Goods that are consumed in fixed proportions, meaning they are used together in a specific ratio.
The Elasticity of Demand measures how the quantity demanded of a good responds to a change in its price, calculated as the percentage change in quantity demanded divided by the percentage change in price.
Completeness is the property that allows a consumer to rank two bundles of goods, indicating a preference for one over the other or indifference between them.
An Ad valorem tax is a sales tax that is calculated as a percentage of the purchase price, such as California's state tax rate of 8.25%.
Changing p c shifts the entire supply curve.
The elasticity of demand measures how the quantity demanded of a good responds to changes in price, remaining constant on a given supply curve.
The effect of a decrease in demand on equilibrium price and quantity depends on the magnitude of the shift in demand relative to the increase in supply.
The Marginal Rate of Substitution (MRS) is the rate at which a consumer is willing to trade off one good for another while maintaining the same level of utility, and it typically diminishes along concave indifference curves.
MRS stands for Marginal Rate of Substitution, which is constant for Perfect Substitutes, such as -2 in this case.
Elasticity of supply measures the responsiveness of the quantity supplied of a good to a change in its price, calculated as the percentage change in quantity supplied divided by the percentage change in price.
Different utility functions generate different shapes and positions of indifference curves, reflecting varying preferences and trade-offs between goods for consumers.
Elasticity of demand varies along a linear demand curve because it changes at different points; it is more elastic at higher prices and less elastic at lower prices.
It shows that the marginal utility per dollar is equated across goods at the optimum.
The equilibrium condition becomes the difference between the demand price and the supply price, adjusted for the unit tax.
Perfect Complements refer to goods that are consumed together in fixed proportions, represented by indifference curves that are nearly right angles at low quantities.
This equation represents the supply function for coffee, where p c is the price and Q is the quantity supplied.
The slope dp/dQ signifies the rate of change of price with respect to quantity supplied, indicating how price changes as supply increases.
A unit tax is a fixed amount of tax imposed on each unit of a good or service sold.
Microeconomic Models are simplified representations of economic processes used to analyze and predict economic behavior.
International firms are increasingly relocating workers both within their home countries and internationally.
The characteristics include a large number of buyers and sellers, identical products, full information about prices and product characteristics, negligible transaction costs, and easy entry and exit for firms.
Natural market forces push the market toward equilibrium quantity and price.
Transitivity refers to the logical consistency of consumer rankings, meaning if a consumer prefers bundle A over B and B over C, then they must prefer A over C.
The demand equation for coffee is represented as Q = p - (0.3 * p) - (0.1 * Y), where Q is quantity demanded, p is price, and Y is income.
Graphical interpretations of consumer preferences over two goods.
The expenditure function shows the minimum expenditure necessary to achieve a specified utility level for a given set of prices.
Microeconomics is the study of how individuals and firms allocate scarce resources.
Scarcity implies trade-offs, necessitating decisions on which goods and services to produce, how to produce them, and who gets to consume them due to limited resources.
Price determines whether quantity supplied equals quantity demanded, as it influences the willingness of producers to supply and consumers to purchase a product.
Yes, the type of tax can affect the price elasticity of demand, consumer behavior, and the overall market equilibrium.
Supply refers to the total amount of a good or service that producers are willing and able to sell at various prices over a given time period.
A tax-sized wedge opens up between demand and supply, leading to identical incidence analysis regardless of who is taxed.
Constraints are limits on the choices consumers can make when purchasing goods and services.
A 1% increase in the price of corn leads to a 0.3% decrease in the quantity of corn demanded.
The price elasticity of demand measures how sensitive the quantity demanded of a good is to changes in the price of that good.
The Marginal Rate of Transformation (MRT) is how the market allows consumers to trade one good for another, represented as the slope of the budget line.
Preference relations summarize a consumer's ranking of goods based on the level of pleasure they receive from each.
Price differences, particularly after-tax, may influence consumer choices between e-books and printed books in different markets.
Economic models involve maximizing something, such as consumer satisfaction or firm profits, subject to resource constraints.
Aggregating Demand Curves is the process of summing individual demand curves to obtain an aggregated demand curve, where at each price, the quantities from the individual demand curves are added together.
Equilibrium price increases by $1 and equilibrium quantity decreases.
An increase in supply results in a decrease in the equilibrium price and an increase in the equilibrium quantity.
The introduction of GM foods generally leads to a decrease in demand.
Tax incidence refers to the analysis of the effect of a particular tax on the distribution of economic welfare, indicating that it does not depend on whether the tax is collected from producers or consumers.
Microeconomic Models are used to understand decision-making processes, resource allocation, and market dynamics in personal and professional contexts.
The highest indifference curve attainable given the budget is the consumer’s optimal bundle.
A tax collected from consumers shifts the demand curve back, indicating a decrease in demand at every price level.
The demand equation for coffee is Q = 12 - p.
Positive Statements are assertions that can be tested for their truthfulness and are used to make factual claims about the economy.
Elasticity indicates how responsive one variable is to a change in another variable.
A Specific (or unit) tax is a sales tax that is fixed in dollar terms, such as the U.S. gasoline tax of $0.18 per gallon.
Given a specific utility function, you can graph a specific indifference curve and determine exactly how much utility is gained from specific consumption choices.
A linear supply function is a mathematical representation that shows the relationship between the quantity supplied of a good and its price, typically expressed in a linear equation format.
Changing the own-price of coffee simply moves us along an existing supply curve.
The optimal bundle is located on the budget line and at the right angle (vertex) of an indifference curve.
The Marginal Rate of Substitution (MRS) is represented as the slope at a particular point on the indifference curve.
A perfectly competitive market is characterized by a large number of buyers and sellers, identical products produced by all firms, full information about prices and product characteristics for all market participants, negligible transaction costs, and the ease of entry and exit for firms.
Indifference curves that are concave to the origin indicate that the Marginal Rate of Substitution (MRS) diminishes, reflecting a decreasing willingness to trade one good for another as consumption of one good increases.
Understanding these relationships allows economists to predict how changes in one variable will affect another variable.
Demand is the quantity of a good or service that consumers are willing and able to purchase at various prices over a given time period.
Game theory is a mathematical framework used for analyzing strategic interactions among rational decision-makers, often applied to predict firm decisions regarding pricing, advertising, and market entry.
The tax changes the price consumers pay by creating a difference between the supply price and the demand price, influenced by the unit tax.
A mining company's extraction decision is influenced by interest rates as they affect the cost of financing and the present value of future profits from extracted resources.
The formula for quantity demanded (Qd) is Qd = 12 - p, where p represents the price.
A supply curve where the elasticity of supply remains constant at all points along the curve.
Minimizing Expenditure refers to the consumer's goal of achieving a specific level of utility while spending the least amount of money possible.
The interior optimum is where the marginal rate of substitution (MRS) equals the marginal rate of transformation (MRT), indicating the optimal allocation of resources.
Income elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in consumer income, calculated as the percentage change in quantity demanded divided by the percentage change in income.
Changing the own-price of coffee simply moves us along an existing demand curve.
The Elasticity of Demand measures how the quantity demanded of a good responds to changes in price, indicating whether demand is elastic or inelastic.
A unit tax is a fixed amount of tax imposed on each unit of a good or service sold, which affects the price received by producers and the price paid by consumers.
Apple pie and Ice cream are examples of Perfect Complements.
A negative sign in the Elasticity of Demand indicates that the relationship between price and quantity demanded is inverse, consistent with the law of demand where an increase in price leads to a decrease in quantity demanded.
The utility function is the relationship between utility measures and every possible bundle of goods.
When supply exceeds demand, it indicates that the quantity of a good or service available in the market is greater than the quantity that consumers are willing to buy, often leading to a surplus.
First-order conditions are mathematical equations derived from the Lagrangian that are used to find critical values in constrained optimization problems.
A mathematical representation of a consumer's preferences, indicating the level of satisfaction or utility derived from different quantities of goods.
A market is where interactions between consumers, firms, and the government occur, and where the prices of goods and services are determined.
A price floor can create a situation where quantity supplied does not equal quantity demanded, as it forces the price above the equilibrium level.
An increase in supply typically leads to a decrease in equilibrium price and an increase in equilibrium quantity, but the actual effect depends on the magnitude of the shift in demand.
When the price of cocoa increases, producers supply less coffee at every price due to the higher cost of inputs.
A price ceiling is a legally imposed limit on the price that can be charged for a product, which often results in the price being set below the equilibrium price.
The general utility function for pizza (q1) and burritos (q2) is represented as U(q1, q2) = U1(q1, q2).
Clorox and Generic Bleach are examples of Perfect Substitutes.
Comparative Statics is the analysis of changes in market price and quantity of a good or service due to alterations in demand, supply, or government policy.
Cross-price elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good, calculated as the percentage change in quantity demanded divided by the percentage change in the price of the other good.
Decision-makers include individuals (consumers), firms, and government.
Firms must decide how much compensation to offer workers to encourage them to move to a new location.
Changes in demand and supply factors can be analyzed graphically and/or mathematically, utilizing demand and supply functions to find a new market equilibrium.
Ordinal utility is a measure that ranks preferences but does not quantify the difference in value between those ranks.
Individual tastes or preferences determine the amount of pleasure people derive from the goods and services they consume.
The supply function describes the mathematical relationship between quantity supplied (Q), price (p), and other factors that influence the number of units offered for sale.
Tax incidence on consumers refers to the amount by which the price to consumers rises as a fraction of the amount of the tax.
The Marginal Rate of Substitution (MRS) is undefined for Perfect Complements.
A utility function represents an individual's preferences and can be transformed while maintaining the same preferences.
The Lagrangian method is a technique used to solve constrained utility maximization problems in economics.
'More is Better' implies that, all else being equal, having more of a commodity is preferred over having less, distinguishing 'goods' from 'bads'.
Imperfect substitutes are goods that can replace each other to some extent but are not perfect replacements, leading to standard-shaped, convex indifference curves.
When the price of sugar increases, it leads to a change in the quantity supplied and demanded, affecting the market equilibrium.
A Cobb-Douglas utility function is a specific form of utility function where the indifference curves are convex and never touch the axes, indicating that both goods are necessary for utility.
Microeconomic models help in forecasting the outcomes of firm decisions, such as changes in output per worker due to layoffs, the cost-effectiveness of moving production abroad, and the impact of price discrimination on profits.
A quasi-concave utility function implies that indifference curves are convex to the origin.
The symbol '≥' conveys weak preference, indicating that a consumer considers one good as at least as good as another (e.g., a ≥ b).
Microeconomic models can help assess the risks and benefits of purchasing insurance for homeowners.
Reflexivity states that a consumption bundle is at least as good as itself, meaning that a consumer is indifferent between a bundle and itself.
Perfect Complements are goods that are consumed together in fixed proportions, meaning the utility derived from one good is dependent on the consumption of the other.
The application of economic principles and policies to mitigate the effects of climate change and promote environmental sustainability.
Behavioral economics adds insights from psychology and empirical research on cognition and emotional biases to the rational economic model.
If the ad valorem tax rate is set to match the per unit tax divided by the equilibrium price, the effects of both types of taxes are the same.
Factors may include cultural preferences for reading formats, price differences, and the overall market dynamics in each country.
Comparative Statics is a method used in economics to analyze the effects of a change in an external variable on the equilibrium state of a market.
'p s' represents the price of coffee, which is assumed to be $0.20 per pound.
A utility function characterized by a specific functional form that allows for an interior solution, representing preferences for two goods with constant elasticity of substitution.
'Y' represents income, which is assumed to be $35,000 in this example, influencing the quantity demanded.
In the supply function for coffee, p represents the price of coffee, measured in dollars per pound.
The marginal rate of substitution represents the rate at which a consumer is willing to give up one good in exchange for another while maintaining the same level of utility.
The utility function for quasilinear preferences is represented as U(q1, q2) = 0.5q1 + q2^2, indicating the relationship between the quantities of goods consumed and the utility derived.
A utility function that exhibits linearity in one good while maintaining non-linear preferences for another, resulting in either an interior or corner solution.
Price discrimination can potentially increase a firm's profits, and this relationship can be examined through microeconomic models.
A Quasilinear utility function is a type of utility function where one good is linear in consumption, allowing for constant marginal utility of money.
The symbol A ∼ B indicates that the preference for bundle A is the same as that for bundle B, meaning the consumer is indifferent between the two.
The $2.40 specific sales tax collected from corn producers affects the supply curve, leading to a decrease in the quantity supplied at each price level.
Normative Statements contain value judgments that cannot be tested and are often based on opinions about what ought to be.
A model is a description of the relationship between two or more economic variables, allowing economists to predict how a change in one variable will affect another.
Differentiating with respect to a helps determine how equilibrium is affected by a small change in the variable a.
The chain rule is used to differentiate functions to analyze how changes in one variable affect the equilibrium condition.
The decision to attend college can be analyzed through microeconomic models to evaluate potential returns on investment in education.
Behavioral Economics is a field that studies how psychological factors influence economic decision-making and consumer behavior.
A firm's technology may or may not remain cost minimizing if it decides to move production abroad, which can be analyzed using microeconomic models.
An Indifference Curve represents combinations of two goods that provide the same level of utility to a consumer, indicating their relative satisfaction from consuming those goods.
The impact on collusive behavior among firms when government bidding results are made public.
Constant Elasticity of Substitution (CES) refers to a class of utility functions that allow for varying degrees of substitution between goods, characterized by a constant elasticity of substitution.
Marginal Production (MP) refers to the additional output generated from using one more unit of an input in production.
The budget line equation can be rewritten in the form y = mx + b, where y represents the quantity of one good, m is the slope, x is the quantity of the other good, and b is the y-intercept.
E-books accounted for only 4.5% of trade books sold in Germany, suggesting a lower acceptance of digital formats compared to the U.S.
The equilibrium condition is represented by the relationship between demand and supply functions, indicating how equilibrium is affected by changes in a variable.
Utility is a measure of satisfaction or pleasure that a consumer derives from consuming goods and services.
An example of a utility function is U(q1, q2) = q1^2 * q2, where q1 represents pizzas and q2 represents burritos.
The effect of a new tax on the total amount of revenue collected by the government from taxpayers.
Inflation can influence rental prices and the affordability of housing, impacting an individual's decision to rent.
Rearranging the equilibrium condition signifies the relationship between changes in supply and demand in response to changes in a variable.
Positive statements can be tested for truth, while normative statements contain value judgments that cannot be tested.
The impact of newly implemented fees on the pricing and quantity of goods transported within the trucking industry.
The term 'Q D' represents the quantity demanded in the market.
MRT stands for Marginal Rate of Transformation, which indicates the rate at which one good can be transformed into another in the context of production.
Continuity refers to the idea that small changes in consumption bundles will not lead to abrupt changes in preferences, ensuring that preferences are stable over small variations.
Marginal Cost (MC) represents the additional cost incurred from producing one more unit of a good.
A Quasilinear utility function is a type of utility function where one good is linear in consumption, allowing for constant marginal utility of money.
The quantity of a good or service that firms supply depends on price and other factors such as the cost of inputs that firms use to produce the good or service.
Indifference curves represent combinations of two goods that provide the same level of utility to a consumer, illustrating consumer preferences.
A type of utility function where two goods are consumed together in fixed proportions, leading to an interior solution.
Quasilinear preferences refer to a type of utility function where utility is linear in one good and nonlinear in others, allowing for a straightforward analysis of consumer choice under varying income levels.
An interior solution occurs when a consumer chooses a positive quantity of all goods, typically resulting from high income levels.
A type of utility function that allows for varying degrees of substitution between goods, resulting in an interior solution.
Deferred payments are compensation arrangements where employees receive payment at a later date, often used by firms to incentivize hard work and retain talent.
Transitivity implies that if a consumer prefers bundle A to bundle B and prefers bundle B to bundle C, then the consumer must also prefer bundle A to bundle C.
Comparative Statistics analyze the changes in equilibrium outcomes in response to shifts in supply and demand, helping to understand the effects of external factors on the market.
The price is determined by the intersection of demand and supply.
Equilibrium occurs when the quantity demanded equals the quantity supplied, represented as D(p, a) = S(p, a).
A positive monotonic transformation is a method of converting one utility function into another while preserving the order of preferences.
Differentiating with respect to the unit tax shows how the tax affects the relationship between demand and supply prices.
The endowment effect refers to the phenomenon where the ownership of goods influences indifference maps, contradicting the assumptions of traditional economic models.
Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price.
A Budget Constraint represents the limit on the consumption choices of an individual based on their income and the prices of goods.
Market Equilibrium is the point where the quantity demanded by consumers equals the quantity supplied by firms, determining the market price and quantity of a good or service.
Demand refers to the quantity of a good or service that consumers are willing and able to purchase at various prices during a given time period.
Graphically, the relationship between Q (quantity supplied) and p (price) is depicted by holding other factors constant, allowing for a clear representation of how quantity supplied changes with price.
Marginal Utility refers to the additional satisfaction or utility gained from consuming one more unit of a good.
Differentiability indicates that for any existing consumption bundle, the indifference curve can be differentiated, ensuring that when preferences are treated as a function, its derivative is solvable.
This concept indicates that in certain situations, the amount of a good that producers are willing to sell does not match the amount that consumers are willing to buy, leading to market imbalances.
The Marginal Rate of Technical Substitution (MRTS) indicates how much of one input must be sacrificed to produce an additional unit of output while keeping total output constant.
Tests of transitivity provide evidence that supports the transitivity assumption for adults, but not necessarily for children.
Preferences are a set of tastes or rankings that consumers use to guide their choices between different goods based on the pleasure derived from consuming each.
The question suggests that Germans may have a preference for printed books, contrasting with American preferences for e-books.
A critical value is a point at which the utility function reaches a maximum or minimum, determined through the first-order conditions.
A negative elasticity value indicates that quantity demanded decreases as price increases, which is typical for most goods.
Completeness is the property that for any two consumption bundles, a preference order can be established, allowing them to be ranked in terms of preference.
'dQ/dp' represents the change in quantity demanded with respect to a change in price.
The symbol '~' indicates indifference, meaning the consumer has no preference between two goods (e.g., a ~ b).
MRS stands for Marginal Rate of Substitution, which represents the rate at which a consumer is willing to substitute one good for another while maintaining the same level of utility.
A Cobb-Douglas utility function is a specific functional form of utility that assumes a constant elasticity of substitution between goods, typically represented as U(x, y) = x^a * y^b.
Perfect substitutes are goods that can be used in place of each other with no loss of utility, meaning the consumer is indifferent between them.
An Isoquant represents combinations of two inputs that yield the same level of output in production.
It means that bundles located on indifference curves farther from the origin are considered more desirable than those closer to the origin, reflecting the principle that more is better.
'p' represents the price of the good or service in dollars.
No, indifference curves cannot cross, as this would imply inconsistent preferences.
American Airlines and United Airlines compete on routes such as Chicago-Los Angeles through strategic decisions related to pricing, service quality, and scheduling.
In the supply function for coffee, Q represents the quantity of coffee supplied, measured in pounds per year.
Indifference curves cannot be thick because if they were, it would violate the assumption of non-satiation, which states that more of a good is always preferred to less, holding other factors constant.
Understanding a firm's production process allows us to predict whether the output produced per worker will rise or fall with each additional layoff.
The formula for quantity supplied (Qs) is Qs = 9 + 0.5p, where p represents the price.
Supply is the total amount of a good or service that producers are willing and able to sell at various prices during a given time period.
Non-satiation means that if one consumption bundle has at least as much of every good as another bundle, then it must have strictly more of at least one good.
Constant Elasticity of Substitution (CES) is a utility function that allows for varying degrees of substitutability between goods, characterized by a constant elasticity of substitution.
The effect of a sales tax on equilibrium price and quantity depends on the elasticities of demand and supply.
'p_c' represents the price of cocoa in dollars per lb.
Indifference curves slope downward, indicating that as a consumer has more of one good, they must give up some of another good to maintain the same level of utility.
The symbol '>' conveys strict preference, indicating that a consumer prefers one good over another (e.g., a > b).
A quasilinear utility function is a type of utility function where the indifference curves can touch one of the axes, indicating that one good can be consumed in fixed amounts regardless of the consumption of the other good.
The new price (p s) after an increase of $3.00 is $6.00.
Perfect Substitutes are goods that can replace each other in consumption at a constant rate, meaning the consumer is indifferent between them.
The decision to pay a lawyer by the hour or as a percentage of winnings can be analyzed using microeconomic principles to determine cost-effectiveness.
The equilibrium price is $2.00, found by solving the equations Qd = 12 - p and Qs = 9 + 0.5p.
The Demand function is a general function of the price of the good, holding all else constant, represented as Q_D(p).
Perfect complements are goods that are consumed together in fixed proportions, meaning the utility derived from one good is dependent on the consumption of the other.
An implicit function in this context refers to the price being expressed as a function of the supply-shifter, represented as p = f(Q_D(a), Q_S(p, a)).
Microeconomic models help in understanding and predicting individual choices, such as consumer behavior and investment decisions.
Salience refers to the evidence that consumers are more sensitive to increases in pre-tax prices than to post-tax price increases from higher ad valorem taxes.
The utility-maximizing condition is expressed as U1/p1 = U2/p2, where U represents utility, p represents prices, and the condition holds under the assumption of quasi-concave utility functions.
The equation for quantity supplied (Q s) is Q s = 8.4 + 0.5p, indicating that quantity supplied increases with price.
The slope of $1 per lb indicates the rate at which the quantity demanded changes with respect to a change in price.
The Marginal Rate of Substitution (MRS) is the rate at which a consumer is willing to give up one good in exchange for another good while maintaining the same level of utility.
Economists are always trying to improve their understanding of the world through the development of new theories.
Completeness is a property of preferences that states that for any two consumption bundles A and B, a consumer can determine whether they prefer A to B, prefer B to A, or are indifferent between the two.
The marginal rate of transformation is the rate at which one good must be sacrificed to obtain more of another good, reflecting the trade-off in production.
Convexity means that for any two consumption bundles on an indifference curve, any weighted average of these bundles is at least as preferred as the bundles themselves.
The symbol A ⪯ B indicates that the preference for bundle A is not greater than (not preferred to) bundle B.
Economic models have assumptions that simplify things relative to the real world, making theoretical predictions that can be tested empirically.
Bounded rationality suggests that calculating post-tax prices is 'costly,' leading some people to avoid doing it, although they would use the information if it were provided.
A corner solution occurs when a consumer chooses to consume only one good and none of the other goods, often resulting from low income levels.
A type of utility function where one good can completely replace another, leading to either an interior or corner solution.
The influence of tariffs on the prices, supply, and demand of goods in domestic and international markets.
The Marginal Rate of Substitution (MRS) indicates how much of one good a consumer is willing to give up to obtain an additional unit of another good while maintaining the same level of utility.
Convexity in preferences indicates that consumers prefer mixtures of goods to extremes, suggesting that a combination of two bundles is preferred over one of the bundles alone.
A Cobb-Douglas utility function is a specific functional form of utility that represents preferences with constant elasticity of substitution between goods.
A Budget Constraint represents the combinations of goods that a consumer can purchase given their income and the prices of those goods, illustrating the trade-offs in consumption.
A corner solution occurs when the consumer's optimal bundle is at one extreme of the budget constraint, typically when the marginal rate of substitution does not equal the marginal rate of transformation.
A comparison of the benefits received by individuals from a price subsidy versus a one-time lump-sum payment.
Elasticity can be evaluated at any point on the demand curve.
The utility-maximizing values of q1 and q2 are dependent on prices p1 and p2, and income Y.
The budget line represents all combinations of goods that a consumer can purchase given their income and the prices of the goods.
To find the market price (p) at equilibrium, set the quantity demanded (Qd) equal to the quantity supplied (Qs) and solve for p.
Reflexivity is a property that states that any consumption bundle A is at least as preferred as itself, meaning A is preferred to A.
Elasticities measure the responsiveness of quantity demanded or supplied to changes in price or other factors, indicating how sensitive consumers and producers are to price changes.
The Effects of a Sales Tax refer to the impact that imposing a tax on goods and services has on market prices, quantity sold, and overall consumer and producer behavior.
The Supply-and-Demand Model should be used to analyze market behavior and predict changes in price and quantity in response to shifts in supply and demand.
Current period income determines a consumer's budget when they cannot save or borrow, limiting their purchasing power to what they earn in that period.
Constrained Consumer Choice refers to the decision-making process of consumers who must make choices within the limits of their budget constraints.
In the coffee supply function, pc represents the price of cocoa, which is an input in the production of coffee, measured in dollars per pound.
The budget constraint represents the relationship between the income available to a consumer and the prices of goods, dictating the maximum quantities of goods that can be purchased.
Market Equilibrium is the state where the quantity demanded by consumers equals the quantity supplied by producers, resulting in a stable market price.
A Production Possibility Frontier (PPF) illustrates the maximum feasible production combinations of two goods given a fixed amount of resources.
The Supply function is a function of the price of the good and some exogenous variable, represented as Q_S(p, a), where 'a' is not in firms' control.
The symbol A ≻ B signifies that the preference for bundle A is greater than (preferred to) bundle B.
Transitivity means that if a consumer prefers bundle A over bundle B and bundle B over bundle C, then the consumer must also prefer bundle A over bundle C.
Continuity implies that if a consumer prefers bundle A over bundle B, there exists another bundle C that is sufficiently close to A such that the consumer also prefers C over B.
The Marginal Rate of Substitution (MRS) is the rate at which a consumer can give up some amount of one good in exchange for another good while maintaining the same level of utility.
The Marginal Rate of Transformation (MRT) indicates how much of one good must be sacrificed to produce an additional unit of another good, given fixed resources.
The budget line equation is represented as p1*q1 + p2*q2 = Y, where p1 and p2 are the prices of goods, q1 and q2 are the quantities consumed, and Y is the income.
