1st exam Flashcards
- Marginal analysis
Leads to the optimization of economic processes & determines the impact that actions will take on changes.
prices, products, etc
- A decision will be considered favorable if
it will increase the income
- Principle of contribution
If it contributes, even if its little, it should stay
- Principle of maximization
Maximization of profits by achieving equilibrium between costs and income
- Principle of equimarginality
best mix to achieve maximum results
- Opportunity cost
Income that could be generated by using the second best option
- Relevance theory:
What is relevant to the study of economics
a. D
b. M
c. S
- Law of demand
The higher the price, the lower the quantity demanded
- Nothing in economics is neutral or without cost
it is necessary to quantify a priori al the costs from a decision made
- The company is productive entity susceptible to being affected in three areas:
a. Related to income
b. To costs
c. To financial aspects
- Before implementing a system of discounts, the company must analyze on the capacity to
maintain these in an environment where prices for inputs increases
- Valuation of economic impact
Any decision to produce anything must be made based on the economic impact on the company
- Consumer logic
Adherence of criteria, patterns of behavior and buying habits
- Utility satisfaction analysis
How consumers organize buying according to the relationship between utility and price
- Marginal utility satisfaction
Added satisfaction from getting one more
- Decreasing marginal utility:
one more unit, less satisfaction
- Rational Behavior
assumption to establish logic of utility satisfaction
- Indifference analysis
Measuring what consumers want and what they can acquire
- Indifference curve:
Result of combination of items with which the customer can obtain the same satisfaction
- Substitution effect
Lowering the price of a good, its relative price also lowers, consumers can purchase extra
- Demand curve
Negative slope
- Profitability of the company:
Generation of profits depend on the proper management of elements making up its operation
- Compound demand
Made up by different uses for an item
- Joint demand:
Demand in combination with another
- Derived demand:
Demand depends on the demand of another end product
- More accurately determining demand
Target market must be identified according to our product, setting litmits on time in terms of function of demand
- Changes in demand vs in quantity demanded
any variable that influences demand vs ocurring by changes on price
- Demand function
Qx f(Px,Mk,Y,Cr,Ad)
a. Technical efficiency
Most efficient method will be the one using resources to produce greatest amount of goods
b. Economic efficiency:
The most efficient process will be the one with less cost
- Production Function:
S=f(G,T,P1,Pi,F1)
- Marginal production
The additional unit produced by adding another worker
- Three phases of production:
a. Phase 1: average production reaches maximum level
b. Phase 2: Last point to marginal production equals zero and average prod is max
c. Phase 3: Pmg is negative, so TP is decreasing
- Cost function
Relationship between productivity and costs of inputs of a company
- Elastic demand products:
High sensitivity to price, if price rises you would substitute with another
Not much sensitivity to price, if price rises you would still think about the same product
- Inelastic demand products
The optimal sales point
is when marginal cost equals marginal income or profit
Economic scarcity and the enterprise
Scarce resources unlimited needs
