Managerial Economics Flashcards
What Forces makes Market economies work?
Supply and demand
<p>
| What do Supply and demand determine ?</p>
<p>
They determine the <span><span>quantity</span></span> of each good produced</p>
<p>
and the<span> <strong>price</strong></span> at which it is sold.</p>
<p>
<br></br>
What does Demand curve Show?</p>
<p>
The Demand Curve <strong>relates</strong> the total quantity demanded of a good to the price charged for that<br></br>
good.</p>
<p>
The demand curve gives the quantity demanded as a function of price.</p>
<p>
<br></br>
What affects the Demand for things ?</p>
<p>
| Income of buyers, price of related goods, expectations, tastes, </p>
<p>
| What are DEMAND SHIFTERS?</p>
<ul> <li style="text-align: center;"> Income</li> <li style="text-align: center;"> The Prices of Other Goods (complements, substitutes)</li> </ul>
<p>
| What does complement goods mean?</p>
<p>
A decrease in the price of one causes demand for the<br></br>
other to increase (shift to the right).</p>
<p>
| What does substitute goods mean?</p>
<p style="text-align:center;"> A decrease in the price of one causes demand for the other<br> to decrease (shift to the left).</p>
<p>
| Demand Function is ?</p>
<p style="text-align: center;"> D = D(p, I, pc, ps)</p> <ul> <li> p = price ,</li> <li> I = income ,</li> <li> pc = price of a complement ,</li> <li> ps = price of a substitute<br /> </li> </ul>
<p>
| What does The Supply Curve show ?</p>
<p>
Relates the total <strong>quantity of a good </strong>offered for sale by all sellers to the<strong> price</strong><br></br>
charged for that good.</p>
<p>
| What is the difference of Supplly Curve and Demand Curve ?</p>
<p>
The demand curve gives quantities that<br></br>
people desire to satisfy their wants (which<br></br>
obviously depend on price), while the supply curve<br></br>
gives the quantity that others want to supply,<br></br>
usually to maximize profits.</p>
<p>
| What are Supply shifters ?</p>
<ul> <li style="text-align: center;"> increases in the minimum wage,</li> <li style="text-align: center;"> adoption of a new technology,</li> <li style="text-align: center;"> imposition of new environmental regulations,</li> <li style="text-align: center;"> the entry of new firms.</li> </ul>
<p>
| What is market clearing price level ? (equilibrium price)</p>
<p>
At the equilibrium price<br></br>
level the quantity demanded is equal to the quantity supplied. No goods Unsold.</p>
<p>
| What does the price elasticity of demand mean?</p>
<p style="text-align: center;"> the ratio of the percentage change in quantity demanded to the percent change in price.</p> <p style="text-align: center;"> Percent change in quantity /<br /> Percent change in price</p>
<p>
What are<br></br>
factors of production (inputs) ?</p>
<ul>
<li>
<strong>Labour</strong></li>
<li>
<strong>Land:</strong> Land and natural resources</li>
<li>
<strong>Capital</strong> (physical capital): All manufactured inputs such as plant, tools, machinery etc.</li>
<li>
<strong>Entrepreneurship:</strong> Initiating and organising of the production of new goods, or the introduction of new techniques, and the risk taking associated with it. </li>
</ul>
<p>
| What is Total physical product (TPP) ?</p>
<p>
| Total output of a product per period of time that is obtained from a given amount of inputs.</p>
<p>
| •What is Average physical product (APP) ?</p>
<p>
Total output per unit of the variable factor in question.</p>
<p>
For example APP of labour is APPL = TPP/L </p>
<p>
| •What is Marginal physical product (MPP) ?</p>
<p>
| The extra output gained by the employment of one more unit of the variable factor.</p>
<p>
| What is Fixed factor ?</p>
<p>
An input that cannot be changed in supply within a given time period.</p>
<p>
(equipment, plant vs.)</p>
<p>
| What is a Variable factor ?</p>
<p>
An input that can be changed in supply within a given time period.</p>
<p>
(Labor)</p>
<p>
| What is the Law of diminishing (marginal) returns ?</p>
<p>
When increasing amounts of a variable factor are used with a given amount of a fixed factor, the MPP of additional units of variable factor will eventually fall.</p>
<p>
Long-run production function is subject to law of diminishing returns.</p>
<p>
| What are Total Costs (TC) ?</p>
<p>
sum of all costs of production. In the short run, TC includes all variable costs (VC) as well as all fixed costs (FC):</p>
<p>
TC = FC + VC </p>
<p>
| What are Variable Costs (VC) ? </p>
<p>
| are all costs that change when output changes. </p>
<p>
| What areFixed Costs (FC) ? </p>
<p>
| All costs that are independent of the level of output</p>
<p>
| What is Average Cost (AC) ? </p>
<p>
per unit cost of production. </p>
<p>
AC = (TC/Q) </p>
| What is Marginal Cost (MC) ?
Change in Total Cost caused by a one unit change in output
MC = (Change in Total Cost) / (Change in Output) = (dTC/dQ)
