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2. Методологія мікроекономіки:
opportunity cost The best alternative that we forgo, or give up, when we
make a choice or a decision i
marginalism The process of analyzing the additional orincremental
costs or benefits arising from a choice or decision.
efficient markets. a market in which profit opportunities are eliminated
almost instantaneously.
microeconomics The branch of economics that examines the functioning
of individual industries and the behavior of individual
decision-making units—that is, firms and households.
an economic theory is a statement or set of related statements about cause
and effect, action and reaction
a model a formal statement of a theory, usually a mathematical
statement of a presumed relationship between two or
more variables.
a variable is a measure that can change from time to time or from
observation to observation.
Ockham’s razor The principle that irrelevant detail should be cut away
ceteris paribus or all else equal .A device used to analyze the
relationship between two variables while the values of
other variablesare held unchanged.
a graph is a two-dimensional representation of a set of numbers,
or data.
the origin. on a Cartesian coordinate system, the point at which the
horizontal and vertical axes intersect.
negative relationship A relationship between two variables, X and Y, in
which a decrease in X is associated with an increase in
Y and an increase in X is associated with a decrease in
Y.
positive relationship a relationship between two variables, X and Y, in which
a decrease in X is associated with a decrease in Y, and
an increase in X is associated with an increase in Y.
a market an institution through which buyers and sellers interact
and engage in exchange. Some of them involve simple
face-to-face exchange; others involve a complex series
of transactions, often over great distances or through
electronic means.
production possibility is a graph that shows all the combinations of goods and
frontier (ppf) services that can be produced if all of society’s
resources are used efficiently.
marginal rate of The slope of the production possibility frontier (ppf ).
transformation (MRT)
absolute advantage the ability of producer that produce some product using
fewer resources.
comparative advantage The ability of producer to produce some product at a
lower opportunity cost.
consumer sovereignty the idea that consumers ultimately dictate what will be
produced (or not produced) by choosing what to
purchase (and what not to purchase
free enterprise the freedom of individuals to start and operate private
businesses in
search of profits.
laissez-faire economy literally from the French:“allow [them] to do.” An
. economy in which individual people and firms pursue
their own self-interest without any central direction or
regulation.
Homo Economicus is a term that describes the rational human being
assumed by some economists when deriving, explaining
and verifying theories and models. Economic human, is
the figurative human being characterized by the infinite
ability to make rational decisions
Kristen and Anna live in the beach town of Santa Monica. They own a small business in which they
make wristbands and pot holders and sell them to people on the beach. As shown in the table on the
following page, Kristen can make 15 wristbands per hour but only 3 pot holders. Anna is a bit
slower and can make only 12 wristbands or 2 pot holders in an hour.
a. For Kristen and for Anna, what is the opportunity cost of a pot holder? Who has a
comparative advantage in the production of pot holders? Explain your answer.
b. Who has a comparative advantage* in the production of wristbands? Explain your answer.
c. Assume that Kristen works 20 hours per week in the business.Assuming Kristen is in
business on her own, graph the possible combinations of pot holders and wristbands that she
could produce in a week. Do the same for Anna.
d. If Kristen devoted half of her time (10 out of 20 hours) to wristbands and half of her time to
pot holders, how many of each would she produce in a week? If Anna did the same, how
many of each would she produce? How many wristbands and pot holders would be
produced in total?
e. e. Suppose that Anna spent all 20 hours of her time on wristbands and Kristen spent 17
hours on pot holders and 3 hours on wristbands. How many of each item would be
produced?
f. Suppose that Kristen and Anna can sell all their wristbands for $1 each and all their pot
holders for $5.50 each. If each of them worked 20 hours per week, how should they split
their time between wristbands and pot holders? What is their maximum joint revenue?
* Comparative advantage. A producer has comparative advantage over another in the production of
a good or service if he or she can produce that product at a lower opportunity cost.
Suppose a manufacturing firm is equipped to produce radios or calculators. It has two plants, Plant
R and Plant С, at which it can produce these goods. Given the labor and the capital available at both
plants, it can produce the combinations of the two goods at the two plants shown.
А 100 0
B 50 25
C 0 50
Output per day, Plant C
Calculators Radios
D 50 0
E 25 50
F 0 100
Put calculators on the vertical axis and radios on the horizontal axis. Draw the production
possibilities curve for Plant R. On a separate graph, draw the production possibilities curve for Plant
C. Which plant has a comparative advantage in calculators? In radios? Now draw the combined
curves for the two plants. Suppose the firm decides to produce 100 radios. Where will it produce
them? How many calculators will it be able to produce? Where will it produce the calculators?