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Investment Practice > microeconomics > Flashcards

microeconomics Flashcards

1
Q

PPF curve

A

shows the different combinations of goods that may be produced if all resources are efficiently utilised

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2
Q

opportunity cost

A

the cost of foregoing the next best alternative

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3
Q

accounting profit

A

excess revenue above explicit costs (costs associated wit production)

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4
Q

economic loss / sub-normal profit
normal profits

A

accounting profit that does not cover opportunity costs
accounting profit that covers opportunity costs (economic profit is 0)

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5
Q

supply

A

amount of a good that sellers are prepared to provide at a certain price over a given period of time

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6
Q

demand

A

amount of a good buyers are prepared to pay at a given price over a given period of time

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7
Q

PED

A

% change in qty / % change in price

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8
Q

elastic and perfectly elastic

A

PED >1
% change in qty > % change in demand
luxury goods
PED = infinity
perfect competition

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9
Q

unit elastic

A

PED =1
% change in qty = % change in price

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10
Q

inelastic and perfectly inelastic

A

PED < 1
% change in price > % change in qty
necessities
PED = 0
product that is vital

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11
Q

PED and total revenue

A

PED >1 , TR increase
PED <1 , TR decrease
PED =1 , TR at MAX

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12
Q

income elasticity of demand

A

% change in qty / % change in income

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13
Q

cross elasticity of demand

A

% change in qty / % change in price of substitute or complementary good

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14
Q

cross elasticity of substitute and complimentary

A

positive
negative

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15
Q

PES

A

% CHANGE IN QTY SUPPLIED / % CHANGE IN PRICE

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16
Q

elastic and perfectly elastic

A

PES > 1
durable goods
manufactured goods
PES = infinity

17
Q

inelastic and perfectly inelastic

A

PES < 1
PES = 0

18
Q

production function

A

relationship be/een different combos of factor inputs and output

19
Q

short run production function

A

period of time for which at least one of the factors is fixed

20
Q

law of diminishing returns

A

further increase in variable input lead to a steadily decreasing marginal product

21
Q

short run costs for a manufacturer

A

total costs
average costs
marginal costs

22
Q

MC = ATC

A

at ATC’s lowest value

23
Q

long-run production function

A

period of time where no factor of production is fixed

24
Q

MES

A

LOWEST POINT ON THE LONG RUN AVERAGE total COST CURVE
level of output where internal economies of scale fully exploited
> MES low output many firms can exist
> MES large i.e. high ratio of fixed costs to variable costs

25
Q

perfect competition market

A

MR = AR = Demand = Price
> where revenues are maximized MR = MC
> long run AR =ATC
> short run AR > ATC

26
Q

ATC

A

explicit + opportunity costs

27
Q

monopolies produce at a level

A

MR , D downward sloping
PRODUCE AT MR = MC
D = AR = P
MR steeper (2x) than D
maintain supernormal profit in long-run AR > ATC

28
Q

monopolistic competition

A

> many producers and consumers
no firm has total control over market price
non-price differences perceived by consumer
few barriers to entry
producers have a degree of control over price (rarely reach economies of scale)

29
Q

oligopolies price behaviour

A

> cartel
kinked demand - all members react to each other’s price behaviour
price leadership - one firm more dominant than other . predatory pricing illegal
game theory - speculative

30
Q

Porter’s five competitive forces

A

> bargaining powers of suppliers
bargaining power of customers
threat of new entrants
threat of substitutes
rivalry between competitors

31
Q

product life cycles

A

> intro phase
growth phase
maturity phase
decline phase
obsolescence

32
Q

SWOT analysis

A

internal
> strengths
> weaknesses
external
> opportunities
> threats

33
Q

four Ps

A

place
product
promotion
price

34
Q

effective demand

A

demand that consumers are not only willing but also able to place on a good or service

35
Q

manufactured gds vs agricultural goods

A

more elastic ( greater supply elasticity)

36
Q

PES long run

A

more elastic than in the short run

37
Q

factors of production

A

land
labour
capital
entrepreneurship

Investment Practice (17 decks)

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