Economics 115 Final- Yale Verified
opportunity cost ️️the value of a resource/good in its "next best use". For example, the
opportunity cost of completing a problem set is the time that you would otherwise allocate to, e.g.,
watching a Yale football game. The opportunity cost of an emotio...
opportunity cost ✔️✔️the value of a resource/good in its "next best use". For example, the
opportunity cost of completing a problem set is the time that you would otherwise allocate to, e.g.,
watching a Yale football game. The opportunity cost of an emotional connection may be the time and
effort that you would otherwise invest in an alternative emotional connection. (ON LAST/PAST YEARS
EXAM 3X KNOW)
law of demand ✔️✔️as the price of a good increases, consumers' demand for that good should
decrease
complement good ✔️✔️a good that is purchased and used in combination with another good; when
the price of this good goes up the quantity demanded of the complement goes down
inferior good ✔️✔️goods that become less demanded as income increases
consumer surplus ✔️✔️the buyers' benefit of being in the market, the total willingness to pay minus
the amount that is actually paid by the consumer
Diminishing returns ✔️✔️Within a firm, diminishing marginal returns implies increasing marginal
opportunity costs of production as output rises. When some input is fixed (say land or capital) and a firm
adds more of other inputs (say fertilizer or labor) to increase production, a point will be reached when
additions of the input yield progressively smaller, or diminishing, increases in output.
substitute good ✔️✔️a good that can be used in place of another good
demand curve ✔️✔️the relationship between the quantity of a good that is demanded and the good's
price holding all other factors constant (q=a-bp)
, supply curve ✔️✔️the relationship between the quantity supplied of a good and the good's price,
holding all other factors constant
surplus ✔️✔️the amount by which quantity supplied exceed quantity demanded when market price is
higher than the equilibrium price
shortage ✔️✔️the amount by which quantity demanded exceeds quantity supplied when market price
is lower than the equilibrium price
price elasticity of demand ✔️✔️the percentage change in quantity demanded resulting from a 1%
change in price
elastic ✔️✔️a price elasticity with an absolute value greater than 1
inelastic ✔️✔️a price elasticity with an absolute value less than 1
unit elastic ✔️✔️a price elasticity with an absolute value of 1
perfectly inelastic ✔️✔️price elasticity of 0 meaning there is no change in quantity demanded or
supplied for any change in price
perfectly elastic ✔️✔️price elasticity of infinity meaning any change in price leads to an infinite change
in quantity demanded or supplied
producer surplus ✔️✔️the difference between the price at which producers are willing to sell their
good or service and the price they actually receive
price ceiling ✔️✔️a price regulation that sets the highest price that can be paid legally for a good or
service
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