definitions Flashcards
subject that deals with allocation od scarce reasources
economics
cost of next best alternative what must be given up to optain what one has
opportuninty cost
applied microeconomics in which it applies economic theory and methodology to business decision making
managerial economics
quanty of a good or service people are willing and able to purchase during a specified time
demand
individual demand
1 person
individual demand pooled together
market demand
horizontal summation of individual demand
market demand
state of balance
market equilibrium
demand changes if price changes
elastic
demand remains constant even if price chage
inelastic
entire output from a given production system
total product
avg contribution per worker
avg product
as increasing quantities of a variable input are added to fixed input in the production process, output must eventually decline
diminishing returns
rate of change
slope
cost that do not vary with output
fixed cost
cost that fluctuates with output
variable cost
a line that a graph gets closer to as it extends toward infinity (or negative infinity) or a specific point but never reaches.
asymptotic
refer to the cost advantages that a business experiences as it increases production. Essentially, the average cost per unit of output decreases as production scales up because fixed costs are spread over a larger number of goods, and operational efficiencies improve.
Economies of scale
competitive environment in the market for any good or service. it influences market behaviour
market structure
a single seller of a highly differentiated product
monopoloy
market dominated by a few sellers
oligopoly
measures how much of the total output in an industry is produced by the largest firms in that industry
concentration ratio
fraction of the total industry sales produced by 4 largest firms in the industry
C4 ratio
the sum of the squared market shares on the firms given industry mulitplied by 10k to eliminate the decimals
Herfindahl Hirchman index
simply involves a markup over the average cost of acquiring or producing a product.
Cost plus pricing
practice of bundling several different products together and selling them at a single bundle price
Commodity bundling
pricing strategy in which profits gained from the sale of one product are used to subsidize sales of a related product
Cross – subsidy
pricing strategy in which a firm sets an internal price at which an upstream division sells an input to a downstream division.
Transfer pricing
a strategy in which a firm advertises a price and a promise to match any lower price offered by a competitor
Price-matching
a pricing strategy in which customers are charged a fixed fee for the right to purchase a product, plus a per unit charge for each unit purchased.
Two part pricing
arises when different customers are charged different prices for the same product, and these different prices are NOT as a result of cost differences.
Price Discrimination
called perfect price discrimination and involves charging different prices to each customer.
Requires that sellers know the maximum amount that each buyer is willing to pay for each unit of output.
First Degree Price Discrimination
Charging different prices based on use rates or quantities purchased.
Second degree Price Discrimination
this is the most commonest form of PD. Involves segmenting customers into different groups, based on common characteristics including but not limited to age, gender, time of purchase etc.
Third degree Price Discrimination
