definition

Consumer Demand Theory, Chapter 6:

Utility

utility concepts:total utility (TU), marginal utility (MU), marginal utility per dollar spent (MU/P), etc.

consumer surplus(the difference between WTP and price paid)

Law of Diminishing Marginal Utility

consumer goal: to maximize utility subject to their budget constraint

deriving the demand curve from the TU/MU model

Optimal Purchase Rule or consumer equilibrium

Indifference Curves and Budget Lines

indifference curves and budget lines

shifts & pivots of the budget line and the resulting change in consumer equilibrium

difference between Income effects and substitution effects

Theory of Firm Behavior, Chapter 7:

Production Relationships

production function

production relationships: total product (TP), marginal product (MP), average product (AP), marginal revenue product (MRP), etc.

distinction between inputs (L and K) and outputs (TP or Q)

Law of Diminishing Marginal Returns

rule for optimal input use (example: price of labor = marginal revenue product of labor)

relationships to remember:MP = change in TP / change in L

AP = TP / L

MRP = price output x MP

Cost Functions

cost relationships:TC, TFC, TVC, AC, AFC, AVC, MC, explicit cost, implicit cost, sunk cost, etc.

relationships to remember:TC = TFC + TVC

AC = AFC + AVC

MC = change in TC / change in Q

TC = explicit cost + implicit cost

short-run and long-run cost functions

economies of scale (i.e., increasing returns to scale), diseconomies of scale (i.e., decreasing returns to scale), and constant returns to scale

Profit Concepts

relationships to remember:P x Q = TR

MR = change in TR / change in Q

economic profit = TR - TC

accounting profit = TR - explicit cost