Economics Flashcards
Types of production
primary = raw materials, fishing etc secondary = conversion to finished products tertiary = commercial and social services
factors of production
land, labour, capital, enterprise
division of labour
practice makes perfect, output increases, savings on training/ tools/ equipment, efficieny
problems: dislocation of production
costs of production
- fixed cost: do not change level of production
- variable cost: change level of production
- short run: time in which at least 1 cost of production is fixed
- long run: all costs are variable
average and marginal costs
total costs = all costs of production (F+V)
average costs = total cost. no of units produced
marginal cost = extra costs of increasing output by one unit
look at notes
revenue
revenue = sales x price
average revenue = total revenue/ no on units sold
marginal revenue = extra revenue obtained by selling more more unit
profit = total revenue - total cost
normal profit = total cost contains normal profit - least profit required to keep system running
abnormal profit = anything above normal profit (NP)
profit maximisation occurs when MC =MR with MC increasing
General economics
the world has limited resources. these are factors of production
land, labour, capital and entrepreneurship - demands from the system are greater than the limited resources therefore driving the system
production frontier
boundary between what can be done and what can’t
opportunity cost
foregone product you did not make because you made another good.
see notes
as the opportunity cost of one good increases, the production of other goods increases
demand
amount consumers that are willing and able to purchase at a given price
as price increases, normally a fall in the quantity of goods demanded
changing the condition of demand
- compliment with other goods
- income
- substitutes
- taste and fashion
compliment with other goods:
- e.g. cars and petrol. if price of cars change, demand for petrol changes
- as price complimentary product rise, demand decreases
income
- if income increases, purchasing power increases - does not change the demand curve
- if tax laws are changed
substitues
- when price of substitute rises, demand rises
taste and fashion
- what influences taste
decrease in demand curve caused by
- increase in price of compliment goods
- reduction in level of income
- reduction in price of substitute goods
- change in taste of fashion
supply
the amount producers are willing to offer for sale at any given price
as price rises, the quantity supply rises
know diagrams!!
contraction and extension of supply
- cost
- other prices
- innovations
- government policy
cost
- cost to a firm of ‘factors of production’
- either firm has to raise prices to maintain profits or reduce supply
other prices
- goods in competitive supply - firm may switch to alternative good manufacture if it can do short term
- goods in joint supply
innovations
- production of same good for less by new technology
gov policy
- may introduce taxation and subsides
Price equilibrium
the position from which there is no tendency to change
