Chapter 2 Overview and Basic Concepts of Demand and Supply Curves

Vocabulary

Demand: The possible quantity of commodity demand function given to consumers in a certain period of time The price level of goods that one is willing and able to purchase.

Demand function: The relationship between the quantity demanded of a commodity and the multiple factors that influence commodity demand.

Demand schedule: A sequence of numbers showing the relationship between the quantities of a commodity demanded at different price levels and the price levels of various corresponding commodities.

Commodity demand curve: Draw a curve based on the demand schedule of the commodity at different prices - a combination of requirements combined with the plane plot.

Supply: Supply of goods is the quantity of goods sold by producers willing and able to provide sufficient prices for a period of time.

Supply function: There is a one-to-one relationship between the supply of a commodity and its price.

Supply schedule: The relationship between commodity prices and the supply of commodities, corresponding to a numerical sequence list of various prices.

Supply curve for a good: A curve drawn on a flat curve based on the combination of different prices of the good in the supply schedule - supply.

Balance: In the most general sense, it refers to economic matters related to the interaction of relatively static state variables under certain conditions.

Equilibrium price: The market demand for a commodity is equal to the market supply price. The number of price levels at which supply and demand balance is equal to is called the equilibrium quantity.

Changes in demand: Changes in the quantity of demand for a commodity caused by changes in the price of a commodity when other conditions remain unchanged.

Changes in demand: changes in commodity prices and quantities under the same conditions, and changes in demand for bulk commodities due to other factors.

, supply change: a change in the supply of a commodity caused by a change in the price of a commodity, other conditions remaining unchanged.

Changes in supply: The price of a commodity is a change caused by factors such as changes in the quantity of the commodity supplied under the same conditions.

International trade theory: Holding other conditions constant, changes in demand lead to changes in the equilibrium price and quantity in the same direction, and changes in the supply equilibrium price result in changes in the opposite direction. The number of changes that make the balance in the same direction.

Economic theory is an overview of the main features of real economic affairs and internal relations and a systematic description of real economic things based on abstraction.

Economic model: a theoretical structure used to describe the relationship between economic variables in economic research.

Exogenous variables: Known variables are determined by factors outside the model. They are built into the model based on external conditions.

Endogenous variables are descriptions of variables in the model system.

Exogenous variables and endogenous variables, endogenous variables determined by exogenous variables and model systems that cannot be explained by exogenous variables.

Parameter: The value is usually the same as the variable, and can also be understood as a constant variable.

Flexible: In general, as long as there is a functional relationship between two economic variables, we can use elasticity to express the sensitivity of the response to changes in the dependent variable.

Elasticity coefficient = change proportion of the dependent variable ÷ variable proportion

Price demand elasticity: the degree of response to changes in commodity prices for changes in demand within a certain period of time. Or, the percentage % change in the price of a good due to demand for the good over a certain period of time.

Price arc elastic demand: changes in demand, the degree of reaction between two points on the commodity demand curve for price changes. Simply put, it represents the elasticity between two points on the demand curve.

Price elasticity of demand: When the change between two points on the demand curve tends to infinity, point elasticity is used to express the price elasticity of demand. In other words, it represents a point on the demand curve where demand changes in response to a price change.

Cross-price elasticity of demand: The extent to which product price changes respond to changes in demand for a commodity within a certain period of time. Or percentage change, when a one percent change in the price of a commodity within a certain period of time causes demand for another commodity.

Substitutes: Two goods can be substituted for each other to satisfy consumers' desires. It is claimed that there is a substitution relationship between two goods and that these two goods are substitutes. products.

Complementary products: If two goods must be used at the same time to satisfy consumers' desires, then there is a complementary relationship between the two goods and the complementary goods of the two goods. Income elasticity of demand

Demand: represents the change in quantity, consumer income of a commodity within a certain period, and is the degree of response to changes in consumer demand.

Normal Goods: Goods for which demand and income change in the same direction. Can be further divided into necessities and luxuries.

Counterfeit goods: The demand for goods and income change in opposite directions.

Price elasticity of supply: The extent to which a given cyclical change in the supply of goods responds to changes in commodity prices. Or the percentage change, the % of the commodity caused by the change in the price of the commodity supplied within a certain period of time.

Arc-shaped price elasticity of supply: The supply of a good that responds to a change in price as a change in the supply curve between two points.

Price elasticity of supply: A little bit of flexibility in the supply curve of a good.

Engel's Law: For a family or a country, the proportion of food expenditures increases as income decreases. To express the concept of elasticity: for a household or country that is richer, the income elasticity of food expenditures is smaller, and conversely, the larger it is.

Chapter Utility Theory

Practical Tool: The assessment of a person's ability of goods to satisfy desires, or the level of consumer satisfaction in consumer goods, utilities.

A unit of measure for the utility of a public utility unit.

Total utility (TU): The sum of utility that a consumer obtains from consuming a certain amount of goods within a certain period of time.

Marginal utility (MU): The increment in the amount of utility that a consumer receives by increasing one unit of commodity consumption in a certain period of time.

Marginal quantity: represents the change in the dependent variable caused by changes in the unit parameters of the quantity.

The independent variable of the change in marginal quantity

The law of diminishing marginal utility: within a certain period of time, while the consumption of other commodities remains unchanged, the amount of each unit of commodities continues to increase , for consumers to increase consumption of goods, the marginal utility of the incremental utility obtained by consumers is decreasing.

Consumer equilibrium: Study the limited monetary income distribution of individual consumers purchasing various goods in order to obtain maximum benefits.

The demand price of a commodity: the highest price consumers are willing to pay for a certain quantity of the commodity within a certain period of time.

Consumer Surplus: The difference between the maximum total price paid and the total price actually paid that consumers are willing to purchase a given quantity of a good.

Indifference curve: expresses consumer preferences for all two goods that have the same combination. Alternatively, it is considered to be a commodity that can bring the same level of utility or satisfaction to consumers in all combinations.

Utility function: A specific combination of goods, given the consumer's level of utility.

Utility function: the utility function of the corresponding indifference curve.

Marginal rate of substitution (MRS): To maintain the same level of utility consumer consumption, the consumption of another commodity needs to be given up to increase one unit of a commodity.

The law of diminishing substitution of goods: the marginal tax rate maintains the same level of utility, and the consumption of goods continues to increase,? The consumers of this good have each unit. A reduction in consumption of another good needs to be given up.

Perfect substitutes: The substitution ratio between two goods is fixed.

Completely complementary products use both goods in fixed proportions.

Budget line: also known as constraint, consumption possibility line and price line. It is said that under the given conditions of consumer income and commodity price, consumers with total income can purchase various combinations of two commodities.

Equilibrium conditions for maximizing consumer utility: certain budget constraints, in order to achieve maximum benefits, consumers should choose the best combination of goods so that the ratio of the marginal tax rates of the two substituted goods is equal than the price of these two commodities.

Compensation budget line: A line that maintains the actual income level of consumers unchanged when changes in commodity prices cause changes in the actual income level of consumers, assuming that the money income increases or decreases. Analysis Tools, .

The income effect is the change in the actual income level caused by changes in commodity prices, and thus the changes in the actual income level caused by changes in the demand for commodities.

Substitution effect: The relative price of commodities caused by changes in commodity prices, which in turn causes relative changes in commodity prices in demand for commodities.

Total utility = income effect + substitution effect

Uncertainty: Economic actors cannot accurately know the results of some decisions in advance, or in other words, as long as the economic results are possible, With more than one actor deciding, it creates uncertainty.

Risk: A consumer's decision-making has to know the various possible outcomes of a certain behavior. If the consumer knows the probabilities of the various possible outcomes, you can call this situation the risk of uncertainty.

Producer (manufacturer, enterprise) production theory's ability to make a unified production decision for a single economic unit.

Transaction cost: as a cost about transaction contract.

Production function: The relationship between the number of various factors produced in a certain period of time, the production use of the same technical level, and the ability to produce the maximum output.

Constant substitution ratio production function: The substitution ratio between any two factors of production is fixed at each level of production.

Constant proportion input production function: The ratio between any pair of factor inputs is fixed at each level of production.

Short run: The only production time to adjust the quantities of all factors of production. There is at least one factor in the production volume that is a fixed time period.

Long-term: Producers can adjust all factors of the production time period.

The total labor output TP is the highest output corresponding to the labor input of a certain variable factor.

The average rate of return of labor refers to the average labor input and output per unit of variable factors.

The increase in the amount of labor input per variable factor unit of the marginal product of labor means increased production.

Diminishing marginal returns in continuous and equal amounts of variable production factors: This phenomenon widely exists in production: under the conditions of the same technical level, in the process of adding other production factors, this When the input amount of a variable factor of production is less than a certain value, the same amount of one or more elements increases the marginal product of the added element; when this variable factor is added, the continuous input of elements exceeding a specific value increases the marginal product of the input Yield decreases. Therefore, the marginal product must eventually exhibit a declining function.

The inputs of two production factors with different combinations of yield curve trajectories produce the same rate of return under the same technical level.

The marginal rate of substitution increases the unit quantity of a certain amount of factor input and decreases the input end of another element while maintaining the production level unchanged.

The law of diminishing marginal technical substitution rate: under the condition of maintaining the same level of production, when the amount of a factor and production input increases, the number of factors that each unit of production can replace another factor of production is decreasing.

Cost line: mature cost, and establishes the trajectory of various numerical combinations of two production factors that producers can purchase under the conditions of production factor prices.

Contour: The trajectory of the isoquant of the point group where the marginal technical substitution rates of these two factors are equal.

Extension line: The price of production factors and other conditions remain unchanged. If the cost of the enterprise is changed, other cost lines will shift, and changing the enterprise's income curve will cost money to form a series of different production balances. , these produce lines tangent to the extension lines of equilibrium loci.

(The extension line must be a diagonal line)

Chapter Cost Theory Opportunity Cost: The opportunity to produce one unit of a good costs the highest-income producer to give up using the same production Elements can be used in other productions.

Accounting costs and expenses are reflected in the company's accounting books during the production process.

Significant cost: the purchase or lease of production factors owned by other manufacturers, the actual expenditure of production factors in the market.

Implicit cost: The enterprise itself, the total price of the factors of production used in the production process. (Since the cost must also be paid according to the opportunity cost perspective of getting the production factors to other uses, the income is the highest. Otherwise, the manufacturer will own the production factors that have been transferred out of the enterprise and have obtained higher profits).

Economic benefits: The difference between sales revenue and total costs, also known as excess profits.

Normal profit: Manufacturer's own incentive to start a business.

Short-run fixed cost (FC): A constant factor of supplier payments for production in the short run. The price paid in the short run does not change the total cost of production. Long-run variable cost (VC) : In the short term, the manufacturer's wages, changes in VC and changes in output are variable elements that produce a certain amount of production. Total cost (TC) is the total cost paid by the manufacturer for all production factors to produce a certain quantity of product in the short run. Average fixed cost (AFC) is the constant production cost that is the average quantity consumed per unit of output in the short run. AFC = FC/Q, change in law: AFC with smaller output has been declining, falling faster and then slower. Average variable cost (AVC) is the firm's average variable cost in the short run that each consumes to produce one unit of output. Average total cost (AC) is the total cost of the manufacturer in the short run to produce one unit of consumption. Marginal cost (MC) is the increase in the amount of increase in production cost caused by the manufacturer in the short run per unit.

Long-term total cost (LTC) changes and changes in LTC production. When the output is zero, there is no total cost change trend with the increase in output. It also increases rapidly, and then the increase is slower and eventually Rapidly increasing (with short-run total costs). Long-run average cost (LAC): The manufacturer with the lowest average total cost of production in the long run. Long-run marginal cost (LMC): The increase in production increment that produces the lowest total cost to the manufacturer in the long run.

The scale of the economy within the economy began to expand production, and the performance of manufacturers who expanded the scale of reproduction improved. Diseconomies of scale (external economies): When production expands to a certain scale, if manufacturers continue to expand production scale, there will be an economic recession.

Chapter 6 Perfectly Competitive Market

Market: A form of interaction in which buyers and sellers can mutually determine their transaction prices through organizational or institutional arrangements.

Market: perfectly competitive market, monopolistic competition market, oligopoly market, monopoly market

Industry: a market for the production of goods, where all suppliers provide goods as a whole.

Perfectly competitive market: There are no factors that hinder or interfere with the market structure.

Sales revenue: manufacturer's revenue.

Total revenue (TR): All revenue earned by a manufacturer from selling a certain product at a certain price.

Average Revenue (AR): A supplier's supplier's revenue per unit of product.

Marginal revenue (MR): the gradual increase in the supplier's total revenue per unit of product sales.

Producer surplus: The difference between the total compensation a manufacturer actually receives for supplying a certain amount of product and the minimum total compensation a manufacturer is willing to accept.

The cost is caused by changes in demand for industrial output in the same industry and production changes, and does not affect the prices of production factors.

Increasing cost industries: Industrial production increases, and the increased demand for production factors will lead to an increase in the prices of production factors.

Cost-reducing industries: The increase in demand for production factors caused by the increase in industrial output value will lead to a decrease in the prices of production factors.

Chapter 7 Perfectly Competitive Market

Monopoly Market: A market organization with only one manufacturer in the industry as a whole.

Price discrimination: The same product is sold at different prices.

Price discrimination (perfect price discrimination): The manufacturer sells the product for the highest price that consumers are willing to pay per unit of product.

Second-degree price discrimination: Asking only the price of different consumer groups in the required quantities.

Degree price discrimination: A monopolist charges different prices for the same product in different markets (or different consumer groups).

Monopolistic competition market: A market in which many suppliers differ in production and sales of products.

Production Group: The sum of mass production listings is very close to that of manufacturers of the same product.

Ideal production is the rate of return at the lowest point of the long-term average cost LAC curve of a perfectly competitive enterprise.

Production Capacity: The difference between actual production and ideal production rate.

Non-price competition: Monopolistic competition, manufacturers usually expand the market share of their products by improving product quality, carefully designing trademarks and packaging, improving after-sales service, and advertising.

Oligopoly market is also called oligopoly market. Refers to the production and market organization in which a very small number of manufacturers control the entire market.

Dominant strategy: No matter what strategy the other players have, the player's optimal strategy is the dominant strategy.

Game equilibrium: All participants do not want to change their strategies in the game, such a relatively static state.

Dominant strategic balance: The balance brought about by the dominant strategic game for all participants.

No player will change his or her optimal strategy Nash equilibrium: if other players do not change their optimal strategies.

Static game: A game in which each player's strategic choice and the balanced outcome of the entire game will determine the outcome of the game, a process in which each player no longer has any effect.

Dynamic game repeated game.

Repeated Game: The structure in the same wave has been repeated many times. is a dynamic game.

"Tit for tat" strategy: all members begin to cooperate. For each member, as long as he cooperates with other members, the cooperation between the two parties will continue. But as long as a member of the cooperation agreement adopts a strategic cooperation agreement of non-cooperation, other members will adopt an "eye for an eye" punishment and retaliation strategy, and other member states have also adopted the same strategy of non-cooperation, and this non-cooperation The strategy repeats again and the game continues with punishment and retaliation for the first player who breaks the agreement.

The demand side in Chapter 8 determines the prices of production factors

Production factors and production factor prices are divided into three categories, namely land, labor and capital. The prices of the three types of factors of production are called rent, wages and profit.

The demand for factors of production from manufacturers that businesses require comes from the direct demand of consumers. Therefore, Western scholars believe that the demand for factors of production is "derived" demand and "causes" demand.

Perfectly competitive firms compete perfectly in perfectly competitive product markets and factor markets.

Value Marginal Product (VMP): The marginal revenue of a perfectly competitive firm that increases the unit usage of an element.

Marginal Factor Cost (MFC): The incremental and incremental ratio of cost to an element, that is, the cost of the derived element.

Marginal revenue product (MRP): refers to the use of unit elements by the seller monopolist to increase revenue.

The seller of a monopolist's product is a market in which the manufacturer (as the seller) is a monopoly, but is a perfectly competitive factor in the market (as the buyer).

Buying a monopoly: A manufacturer is a monopoly in a factor market and is a perfect competitor (as a buyer) of a factor (but as a seller of a product in the market).

Chapter 9 Supply-side Decisions

Labor supply curve: Only when the prices of production factors remain unchanged under other conditions, what is willing and able to provide within a certain period of time Labor time, worker's wage level may.

"Owned resources": resources of all remaining resources, eliminating factors of production that supply the market.

The price extension line: the rotation of the geometric point of the budget line E (the consumer in the initial state) and the tangent point of the indifference curve, also known as the PEP of the curve.

Leisure time except sleeping and labor supply time: all activities.

The substitution effect of wage rate refers to the impact of changes in wage rate and the substitution relationship between laborers’ consumption of leisure and other commodities.

The income effect of wage rate changes is the impact of changes in wage rates, workers’ income and working hours.

Interest rate Interest rate: The price at which a company uses capital, which refers to the price at which manufacturers provide "services" using funds used in the production process.

Capital is produced by the economic system itself and serves as a production input for the further production of more goods and services, tying land and labor as a factor of production.

Rent: The price of general resource services, with a fixed supply.

Short-term return (rate) of quasi-rent

Economic rent is a fixed resource or some element of production factor, which is subtracted from the total income of the element. This part will not affect the element supply. This is due to the factor of increased demand, producers can get the balance of retaining the element of attack but at least paying more for the cost.

Lorentz curve: used to reflect the average income distribution curve of society.

Euler's theorem: Under conditions of full market competition, if returns to scale remain unchanged, it will be sufficient to allocate various production factors of the entire product, but not too much. This theorem is also known as the net exhaustion theorem of distribution.

The Gini coefficient Lorenz curve indicator reflects the equality of income distribution.

Chapter General Equilibrium Theory and Welfare Economics

Partial equilibrium and general equilibrium Partial equilibrium analysis: Assuming other markets remain unchanged, a separate analysis of changes in prices, market supply and A method of analyzing demand (or economic units).

Partial equilibrium: Assume that the market conditions of a single market or single factor market equilibrium remain unchanged.

In a general equilibrium economy, all economic units and their markets are in equilibrium.

Walras's Law: When all markets are considered together, no matter how high the price of goods is, all expenditures must equal the sum of all total economic income.

Production possibilities curve: The maximum production of these two products under the conditions under which a given set of technologies and resources can produce an economic system, also known as the product conversion curve.

Pareto optimal state (economic efficiency): It is impossible to improve the situation of some people without affecting the economic and social status of other members under the conditions of reallocation of resources.

Pareto improvement: Through the reallocation of resources, a situation can be achieved where at least one person is worse than anyone else.

Contract curve: The curve becomes the exchange contract curve (or efficiency curve) and the production contract curve (or efficiency curve). The curve of the foreign exchange contract represents the optimal allocation of consumers between the two product sets. The production contract curve represents the set of optimal allocation states of two producers between two elements.

Chapter 11 Market Failure and Microeconomic Policy

The Reality of Market Failure The capitalist market mechanism cannot lead to the effective allocation of resources, and the free market equilibrium deviates from Pareto on many occasions. Optimal.

Price control: This is based on the principle that the government has implemented price controls in a monopoly industry. It provides a price control or a price ceiling below the market price. The monopoly will obtain a certain amount of excess profits. Determined, but this profit is lower than the excess profit determined by the monopolist's independent pricing. The government stipulates that lower than the maximum price determined by the supplier's independent pricing, it is equal to the marginal cost of the manufacturer's market demand, which is an appropriate choice for the regulated price.

Natural monopoly industries, controlled by so-called natural monopoly industries, within the output range of economies of scale, the relative range of market demand gradually decreases, as output increases, the average cost of manufacturers increases.