Microeconomics

Production Function

Land, Labour, Capital, Enterprise

Determinants of Supply

Factors that influence the amount of a product supplied to the market, excluding income.

Average Total Cost (ATC)

Calculated by dividing total costs by the number of units produced.

Price and Quantity Demanded Relationship

Described as negative or inverse; when price increases, quantity demanded generally decreases.

Change in the Price of the Good Itself

Does not result in a change in demand; it is a movement along the demand curve.

Determinants of Price Elasticity of Demand

Factors that affect how responsive the quantity demanded is to a change in price; one is not the level of supply.

Elastic Demand

Occurs when percentage change in quantity demanded is greater than percentage change in price.

Marginal Product

The additional output that results from using one more unit of a variable input.

Decreasing Returns to Scale

Occurs when an increase in output is proportionately smaller than the increase in inputs.

Supply Curve Influencers

Factors such as production costs, technology, and government policies that affect the supply of goods.

Substitute Product

A product whose demand increases when the price of a similar product increases.

Minimum Wage Effects

Setting minimum wage above equilibrium results in excess supply of labour.

Price Elasticity of Demand Calculation

The ratio of percentage change in quantity demanded to percentage change in price.

Perfectly Competitive Industry Characteristics

Includes homogeneous products and many firms.

Price Ceiling

The maximum price set by the government that sellers can charge for a product.

Normal Good

A good where an increase in income leads to an increase in demand.

Centrally Planned Economy

An economic system where government allocates all resources and decisions.

Oligopoly

A market structure with few firms, each capable of influencing the market price.

Price Taker Firm

A firm that cannot influence the market price and accepts the market price as given.

Diminishing Marginal Utility

The principle that as a person consumes more of a good, the additional satisfaction decreases.

PPF Shift Factors

An outward shift may occur due to an increase in skilled workers.

Inferior Good

A good for which demand decreases as consumer incomes increase.

Total Cost Calculation

Sum of fixed and variable costs at a given output level.

Short Run Production

A period where at least one input is fixed.

Monopoly Characteristics

Defined by barriers to entry and exit.

Price Elasticity of Demand Interpretation

PED greater than 1 indicates elastic demand.

Demand Curve Equation Example

Q = 40 - 6P, representing a linear demand curve.

Equilibrium Price and Quantity

Found where the supply and demand curves intersect.

Supply Curve Shift Left

Caused by factors such as increased input prices.

Market Excess Demand

Occurs when quantity demanded exceeds quantity supplied.

Price Maker

A firm that has the power to set the price of its product due to lack of competition.

Consumer Price Elasticity Strategy

If demand is elastic, lowering price can increase total revenue.

YED for Apple iPhones

+4.6 indicates a luxury good with high income elasticity.

Price Control Effects

Generally leads to higher prices and potential excess supply.

Negative income elasticity indicates

That the product is an inferior good.

Supply Curve Nature

Typically slopes upwards due to higher prices incentivizing more supply.

Marginal Cost Calculation

MC for the second unit is the change in total costs from producing one additional unit.

PED of -0.9 indicates

Inelastic demand, as quantity demanded changes less than price.

Economic Problem Study

Focuses on allocation of scarce resources.

Demand Curve Movement

Price increase leads to lower quantity demanded and a movement along the curve.

Monopolistic Competition Products

Described as heterogeneous due to product differentiation.

Positive Income Elasticity indicates

The good is a normal good.

Supply Curve Shift Right Factors

Improvements in technology used in production typically shift supply to the right.

Law of Demand

States that higher prices lead to lower quantity demanded.

Price Elasticity of Demand for Protein Bars

3% increase in demand with 2% decrease in price indicates elastic nature.

Demand Increase with Decrease in Supply

Price rises, quantity change is uncertain due to opposing forces.

Demand Curve Definition

Illustrates the relationship between price and the quantity demanded.

Perfectly Competitive Firm Price Taker Definition

They cannot influence the market price and must accept the going rate.