Supply and Demand, Profit Calculations, and Economic Graphs

These flashcards cover key economic concepts related to supply and demand graphs, profit calculations, and economic diagrams.

Supply and Demand Graph

A visual representation of the relationship between the quantity of a commodity that producers are willing to sell and the quantity that consumers are willing to buy.

Consumer Surplus

The difference between the highest price a consumer is willing to pay and the actual price they pay.

Producer Surplus

The difference between the actual price producers receive and the minimum price they would be willing to accept.

Equilibrium

The point at which the quantity demanded equals the quantity supplied, resulting in a stable market price.

Tax on supply and demand

When a tax is imposed, the supply curve shifts leftward, leading to a new equilibrium with higher prices and lower quantities.

Accounting Profit

Calculated as total revenue minus explicit costs.

Economic Profit

Calculated as total revenue minus both explicit and implicit costs.

Break-even Point

The level of production where total revenues equal total costs, resulting in no profit or loss.

Shutdown Zone

The range of prices that are below average variable costs, where a firm should cease production.

Profit Zone

The range of production levels where marginal cost is less than average total cost, leading to profit.

Long-Run Aggregate Supply (LRAS) in recession

A graphical representation indicating that the economy is producing below its potential output.

Long-Run Aggregate Supply (LRAS) in expansion

A graphical representation indicating that the economy is producing at or above its potential output.