question
Fixed Costs
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Costs that are fixed irrespective of the level of output
E.g. rent for a building
E.g. rent for a building
question
Variable Costs
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Which vary with the level of output
E.g. Each extra unit of a good produced will require additional units of raw materials, Labour, etc.
E.g. Each extra unit of a good produced will require additional units of raw materials, Labour, etc.
question
Total Cost =
answer
Fixed cost + Variable cost
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Total Revenue =
answer
Price x Quantity
question
Break even output occurs when
answer
At output Q* where TC = TR
question
Linear Equations have no?
answer
Exponents
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Price Elasticity of Demand
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A measure of how much the quantity demanded of a good responds to a change in the price of that good
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Price elasticity of demand =
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Percentage change in quantity demanded / percentage change in price
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An example of a linear demand function is
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Q = a - bP
Where P = Price
Where P = Price
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An example of a linear indirect demand is
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P = a - BQ
Where Q = Quantity
Where Q = Quantity
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Several Variables that influence the quantity supplied of good X
answer
Q
P
C
P1
Te
N
O
P
C
P1
Te
N
O
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Q =
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The quantity of good x supplied
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P =
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The price of the good itself
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C =
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The cost of production
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Po =
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Is the price of other goods
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Te =
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Is the available technology
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N =
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The number of producers in the market
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O =
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is the other factors like taxes or subsidies
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A price taking firm is known as a ?
answer
Perfectly competitive firm
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Tr = PoQ
answer
Where Po is the constant price of the good and is represented by the vertical intercept of a horizontal demand function
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Profit
answer
TR-TC
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Breakeven Point =
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TR = TC
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Point elasticity of Demand =
answer
Ed = percent change in quantity demanded / percent change in price X P/Q
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