Considering small changes to a particular output/input
New cards
2
What is Marginal utility?
The benefit to the consumer of consuming an additional good/service
New cards
3
What is the equation for Marginal utility?
New cards
4
What is the equi-marginal principle?
When the marginal utility per dollar spent is equal to the marginal utility of good y per dollar spent
New cards
5
What is the law of diminishing marginal utility?
As you consume more units, the additional utility from additional units is less than additional utility from previous units
New cards
6
What is a variable cost?
Expenses that change as output changes e.g. raw materials
New cards
7
What are fixed costs?
Expenses that don’t change as output changes
New cards
8
What is the equation for Total Costs?
TC = FC+ VC
New cards
9
What is Marginal cost?
The cost of producing an additional unit
New cards
10
What is the equation for marginal cost?
New cards
11
How do firms maximise profit?
→ Minimising costs
→ Maximising revenue
New cards
12
Flip
SHORT RUN:
→ At least one F.O.P is fixed
\ LONG RUN:
→ All F.O.P are variable
New cards
13
What is the law of diminishing returns?
When an additional FOP is added to fixed FOP, eventually there comes a point in time where additional output added by extra workers is less than additional output added by previous workers
New cards
14
As output increases, averages costs increases. Why?
Each additional worker provides more additional output than the previous worker, before the law of diminishing returns sets in
New cards
15
Graph showing diminishing returns:
New cards
16
Why are firms price makers?
Firms can influence price as they provide sufficient output to influence market supply
New cards
17
What is marginal revenue?
Additional/change in revenue from selling an additional unit of output
Studied by 4 people
