Unit 7 & 8 Flashcards
1
Q
homogeneous goods?
A
- completely identical
- firms are price takers
2
Q
differentiated goods?
A
- firms are price setters
- consumer values characteristics
3
Q
profit calc?
A
total revenue less total costs
((price x cost) x quantity)
4
Q
law of demand?
A
demand curves have negative slopes
higher price = lower quantity
5
Q
reason for law of demand?
A
- willingness to pay decreases as quantity acquired increases
- rather buy from cheaper competitor
- price increase result in it being too expensive
- some products will not be bought when price increase
6
Q
reasons for line shift?
A
- change in preference
- change in income
- change in competitor’s prices/ products
- access to new markets
7
Q
reason for move along curve?
A
price increase/ decrease
8
Q
average cost calc?
A
= (total cost x quantity) / quantity
9
Q
marginal cost?
A
change in total cost / change in quantity
10
Q
marginal cost < average cost?
A
AC is decreasing
11
Q
marginal cost > average cost?
A
AC is increasing
12
Q
profit maximised?
A
where MC = MR
13
Q
marginal revenue increase?
A
when quantity increase
14
Q
MR > MC?
A
increase production (quantity)
15
Q
MR < MC?
A
deacrease production (quantity)
