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UCL ECON 100% PASSED
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economic rent A payment or other benefit received above and beyond what the individual would have received in his or her next best alternative (or reservation option) isocost line A line that represents all combinations that cost a given total amount cost of production equation c = (wL) + (pR...

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  • February 8, 2024
  • 8
  • 2023/2024
  • Exam (elaborations)
  • Questions & answers

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  • ucl econ 100 passed

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  • A/AS Level
  • AQA
  • ULC ECONS
  • ULC ECONS
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UCL ECON 100% PASSED
economic rent

A payment or other benefit received above and beyond what the individual would have received in his
or her next best alternative (or reservation option)

isocost line

A line that represents all combinations that cost a given total amount

cost of production equation

c = (wL) + (pR)

isocost line slope

- (w/p)

Diagram: Production Function-diminishing average product of labour




Malthus argument as diagram




Malthusian problem

His model does not take account of the possibility a persistent positive technology shock that may offset
the diminishing average product of labour

(There are only 2 goods in the economy) What happens if the substitution effect is bigger than income
effect, and if the price of good 1 decreases

the consumption of good 2 decreases

Is the income effect positive or negative on consumption

, Positive, Substitution effect is negative

relative price

The price of one good or service compared to another (usually expressed as a ratio)

relative price of labour

slope of the isocost line (-w/p)

marginal product

The additional output that can be produced by adding one more unit of a specific input, ceteris paribus.
-> slope of production function,
if y=f(h) its dy/dh

Average product of labour

Divide production function by units
e.g. y=f(h), APL= f(h)/h

indifference cure

A curve of the points which indicate the combinations of goods that provide a given level of utility to the
individual
-> slope downwards due to trade offs, slope=MRS
-> don't cross

Marginal Rate of Substitution (MRS)

the rate at which a consumer would be willing to trade off one good for another

e.g. U(l,y)=c

-> MRS= dU/dl / dU/dy

Marginal rate of transformation

The quantity of some good that must be sacrificed to acquire one additional unit of another good.
-> At any point, it is the slope of the feasible frontier.

budget constraint

An equation that represents all combinations of goods and services that one could acquire that exactly
exhaust one's budgetary resources.

income effect

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