SOC SCIE

Question 1

an economic term that refers to the complete satisfaction from a good or service consumption.

Answer 1

Utility

Question 2

The assumption for the theory:

1. Consumers are going to make full use of their purchases.
2. It is necessary to consider the economic utility of a good or service, as it influences the demand, and therefore price, for
   that good or service directly.

It is difficult to calculate and quantify a consumer utility in reality. However, some economists believe that by using different models, they can indirectly estimate what is suitable for the economic good or service.

Answer 2

Utility in economics was first coined by the
noted 18th-century Swiss mathematician
Daniel Bernoulli. Since then, economic theory
has progressed, leading to various types of
economicutility (Chappelow, J., 2020).

Question 3

the idea that individuals could order or rank the usefulness of various discrete units of economic goods

Answer 3

Ordinal Utility

Question 4

quantitative measurement of satisfaction

Answer 4

Cardinal Utility

Question 5

is defined as the sum of the satisfaction that a
person can receive from the consumption of all units of a
specific product or service.

Answer 5

Total Utility (TU)

Question 6

TU = sum of all utils received

Question 7

is defined as the additional utility gained from the consumption of one additional unit of a good or service, additional
utility gained from the consumption of one additional unit of a good or
service.

Answer 7

Marginal Utility (MU)

Question 8

if the income or budget constraint increases, the consumption for the goodwill also increases, and vice versa.

Answer 8

NORMAL GOOD

Question 8

MU = TU/Q = CHANGE IN TOTAL UTILITY/CHANGE IN QUANTITY

Question 9

if the income or budget constraint increases, the consumption of the goodwill decreases, and vice versa.

Answer 9

Inferior Good

Question 10

occurs when price changes and consumers are incentivized to consume less of the good with a relatively higher price and more with a relatively lower price .

Answer 10

substitution effect

Question 11

occurs when the buying power of the income is reduced due to the price increase, thus leading to just buying
less of the goods.

Answer 11

Income effect

Question 12

it is usually referred to as money. However, since money is not specifically involved in the production of a good or
service, it is not a factor of production. Instead, the money allows the manufacturers and owners of businesses to purchase capital goods or properties or pay wages in the process of production. Is the key-value engine for neo-classical economists.

Answer 12

Capital

Question 12

is responsible for creating economic value. Is generally defined as a productive factor and can take various forms,
from agricultural land to commercial real estate to resources from a specific piece of property. Is used to harvest and process natural resources such as oil and gold for human consumption. The farmers’ cultivation of crops on land increases their value and usefulness.

Answer 12

Land

Question 12

were introduced by the Father of Economics, Adam Smith. The inputs
required to produce a good or service are called Factors of Production. It includes land, labor, entrepreneurship, and capital

Answer 12

Factors of Production

Question 13

was the critical driver of economic value, according to early economists. It refers to the effort spent by a person to produce goods or services. Laborers are paid salaries that depend on their ability and
experience for their time and energy. Work performed at low rates is by an uneducated and unskilled worker. Skilled and educated workers are considered intellectual resources and command higher wages as they can do more than their physical abilities.

Answer 13

Labor

Question 14

Is a special recipe that mixes all other factors of production in the market into a good or service. This is not considered
as a factor of production at first. But some economists identify entrepreneurship as a factor of production because it can increase the productive efficiency of a firm.

Answer 14

Entrepreneurship

Question 15

Factors of Production:
Land
Labor
Capital
Entrepreneurship

Answer 15

Inputs

Question 15

In economics, the physical output of a production process is
related to the physical inputs or output factors. It’s a math
function that refers to the cumulative output from the sum, usually
capital and labor, of a certain number of inputs. Therefore, the
production function defines a limit describing the output limit that
can be reached from each possible combination.

Answer 15

PRODUCTION FUNCTION

Question 16

Goods and Services

Answer 16

Outputs

Question 17

Mathematical function and relationship between inputs and outputs in the production process

Answer 17

P.F.

Question 18

Firms use the production function to decide how many of the goods or
services they will be able to produce and the combination of inputs to
create a good or service

Question 19

The average product is computed if we divide the total product by
the number of inputs used. Since we are calculating the average
product based on the labor, we also measure the productivity of
each labor given the number of output produced.

Answer 19

Average Product (AP)

Question 20

To produce its output, the company uses several inputs (land, labor,
capital). If only one input varies (labor) and the other input amounts
remain constant, then the total output is produced depending on the
variable input.

Answer 20

Total Product

Question 21

So, as we’ve discussed in the previous lesson, we’ll be seeing more
of the marginal analysis. In this case, we are computing for the
additional product added as we add more input, which is labor.

Answer 21

Marginal Product (MP)

Question 22

APL = TP/Q

Answer 22

MPL = TP/Q

Question 23

is the total cost for the fixed inputs given the total number of output

Answer 23

Total Fixed Costs (TFC)

Question 24

is the total cost for the variable inputs
given the total number of output

Answer 24

Total Variable Costs (TVC)

Question 25

the overall costs given the total number of output
TC = TFC + TVC

Answer 25

Total Costs (TC)

Question 26

is the per unit costs of the fixed inputs
AFC = TFC/Q

Answer 26

Average Fixed Costs (AFC)

Question 27

– is the per unit cost
AC = TC/Q
Since, TC = TFC + TVC, then AC = AFC + AVC

Answer 27

Average Costs (AC)

Question 28

is the increase in total cost that arises from an extra unit of production
MC = TC2 – TC1/ Q2 – Q1

Answer 28

MARGINAL COST (MC)

Question 29

is the simplest method wherein you add the markup percentage to the average total cost of producing the product. You can compute the selling price by:
Selling price = per unit cost + (per unit cost x markup percentage)

Answer 29

The Cost-plus Pricing Method

Question 30

is a variation of the Cost-Plus Pricing Method. The selling price is computed by adding a percentage of the cost to the total cost per unit. The equation is as follows:
Markup price = per unit cost / 1 - desired return on sales

Answer 30

Markup Pricing Method

Question 32

is based on the expected return on investment given the target number of sales and the total amount invested in business. It can be computed as follows:
Target return price = Unit cost + (desired return rate x capital investment)
Unit sales

Answer 32

The Target-Return Pricing Method

Question 33

is the first part of the consumption theory
framework or the way in which consumers make the most of them money, and it describes all the products and services that the customer can provide. In reality, there are several goods and services that have to be selected. Still, for discussion purposes, in economics, we restrict it to two products at a time to graphical simplicity.

Answer 33

Budget Constraints