Podcast
Questions and Answers
What is defined as the value of the next best alternative forgone when making a choice?
What is defined as the value of the next best alternative forgone when making a choice?
In a perfectly competitive market, which characteristic is NOT true?
In a perfectly competitive market, which characteristic is NOT true?
The law of demand states that as price increases, what happens to quantity demanded?
The law of demand states that as price increases, what happens to quantity demanded?
What does a budget constraint graphically represent?
What does a budget constraint graphically represent?
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What occurs when the price is above equilibrium, leading to an excess supply?
What occurs when the price is above equilibrium, leading to an excess supply?
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In which market structure do few firms produce either identical or differentiated products and operate with interdependent decision-making?
In which market structure do few firms produce either identical or differentiated products and operate with interdependent decision-making?
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Which term refers to the additional cost incurred by producing one more unit of output?
Which term refers to the additional cost incurred by producing one more unit of output?
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Which effect results in a change in quantity demanded due to income changes, holding price constant?
Which effect results in a change in quantity demanded due to income changes, holding price constant?
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Study Notes
Basic Concepts
- Microeconomics: study of individual economic units such as households, firms, and markets
- Economic Agents: individuals, households, firms, and government that make decisions about how to allocate resources
- Scarcity: fundamental problem of economics, where unlimited wants exceed limited resources
- Opportunity Cost: value of the next best alternative forgone when making a choice
Consumer Behavior
- Consumer Preference: individual's likes and dislikes
- Budget Constraint: graphical representation of possible combinations of two goods that a consumer can afford
- Demand: quantity of a good or service that a consumer is willing and able to purchase at a given price level
- Law of Demand: as price increases, demand decreases (ceteris paribus)
- Substitution Effect: change in quantity demanded of a good in response to a change in its price, holding utility constant
- Income Effect: change in quantity demanded of a good in response to a change in income, holding price constant
Production and Cost
- Production Function: relationship between the quantity of inputs used and the quantity of output produced
- Marginal Product: additional output produced by one additional unit of input
- Average Product: total output produced per unit of input
- Cost: expenditure incurred by a firm in producing a good or service
- Total Cost: sum of fixed and variable costs
- Marginal Cost: additional cost incurred by producing one additional unit of output
- Average Cost: total cost per unit of output produced
Market Structure
- Perfect Competition: many firms producing identical products, free entry and exit, perfect information
- Monopoly: single firm producing a unique product, barriers to entry, imperfect information
- Monopolistic Competition: many firms producing slightly differentiated products, free entry and exit, imperfect information
- Oligopoly: few firms producing either identical or differentiated products, interdependent decision-making, imperfect information
Market Equilibrium
- Market Equilibrium: point at which the supply and demand curves intersect, where quantity supplied equals quantity demanded
- Equilibrium Price: price at which the market is in equilibrium
- Equilibrium Quantity: quantity exchanged at the equilibrium price
- Surplus: excess supply, occurs when price is above equilibrium
- Shortage: excess demand, occurs when price is below equilibrium
Microeconomics
- Studies individual economic units: households, firms, and markets
- Examines economic agents: individuals, households, firms, and government who make decisions on resource allocation
Economic Fundamentals
- Scarcity: unlimited wants exceed limited resources, a fundamental problem in economics
- Opportunity Cost: value of the next best alternative forgone when making a choice
Consumer Behavior
- Consumer Preference: an individual's likes and dislikes
- Budget Constraint: graphical representation of possible combinations of two goods a consumer can afford
- Demand: quantity of a good or service a consumer is willing and able to purchase at a given price level
- Law of Demand: demand decreases as price increases, ceteris paribus
- Substitution Effect: change in quantity demanded in response to a price change, holding utility constant
- Income Effect: change in quantity demanded in response to an income change, holding price constant
Production and Cost
- Production Function: relationship between input quantity and output quantity
- Marginal Product: additional output produced by one additional unit of input
- Average Product: total output produced per unit of input
- Cost: expenditure incurred in producing a good or service
- Total Cost: sum of fixed and variable costs
- Marginal Cost: additional cost incurred by producing one additional unit of output
- Average Cost: total cost per unit of output produced
Market Structure
- Perfect Competition: many firms, identical products, free entry and exit, perfect information
- Monopoly: single firm, unique product, barriers to entry, imperfect information
- Monopolistic Competition: many firms, slightly differentiated products, free entry and exit, imperfect information
- Oligopoly: few firms, identical or differentiated products, interdependent decision-making, imperfect information
Market Equilibrium
- Market Equilibrium: point where supply and demand curves intersect, quantity supplied equals quantity demanded
- Equilibrium Price: price at which the market is in equilibrium
- Equilibrium Quantity: quantity exchanged at the equilibrium price
- Surplus: excess supply, occurs when price is above equilibrium
- Shortage: excess demand, occurs when price is below equilibrium
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Description
Test your understanding of fundamental microeconomics concepts, including economic agents, scarcity, and opportunity cost, as well as consumer behavior and preferences.
