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GIFFEN GOOD: A rare type of good seldom seen in the real world, in which a change in price causes quantity demanded to change in the same direction (in violation of the law of demand). In other words, an increase in the price of a Giffen good results in an increase in the quantity demanded. The existence of a Giffen good requires the existence of special circumstances. First, the good must be an inferior good. Second, the income effect triggered by a change in price must overwhelm the substitution effect. A Giffen good is most likely to result when the good is a significant share of the consumer's budget.
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Lesson 3: Scarcity | Unit 2: Resources
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Page: 8 of 17
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- The use of limited resources (factors of production) to produce goods and services that satisfy wants and needs.
- The four basic types of resources: labor, capital, land, and entrepreneurship.
- Labor as the human effort used to produce goods.
- Capital as the manufactured resource used in production.
- Land as the natural resources that provide the materials used in goods.
- Entrepreneurship as the factor that combines other resources in the production process.
- Differences between limited, scarce, and free resources.
- The fuzzy areas of overlap between the different types of resources.
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PERFECT COMPETITION, LONG-RUN EQUILIBRIUM CONDITIONS The long-run equilibrium of a perfectly competitive industry generates six specific equilibrium conditions, including: (1) economic efficiency (P = MC), (2) profit maximization (MR = MC), (3) perfect competition (MR = AR = P), (4) breakeven output (P = AR = ATC), (5) minimum production cost (MC = ATC), and (6) minimum efficient scale (MC = ATC = LRAC = LRMC).
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Al Capone's business card said he was a used furniture dealer.
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"Sometimes when you innovate, you make mistakes. It is best to admit them quickly and get on with improving your other innovations. " -- Steve Jobs, Apple Computer founder
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TU
Total Utility
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