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demand function equation
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QD=g(P1, P2, ... Pn, Income, Taste and Preferences)
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Change in Demand
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The whole function changes so the whole demand curve changes
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change in quantity demanded
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A change along the curve. The function stays the same, the curve just changed.
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Supply Function
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QS= g(P1, Plabor, Pkapital, Technology, and N)
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Cost Structure: conditions to produce in short run
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Our price is above over average variable cost
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Cost Structure: conditions to produce in long run
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Our price is above our average total cost.
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In a perfect market...
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- Marginal Revenue = marginal cost
- all profits and costs = 0
- all profits and costs = 0
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Cost structures: if the Average Total Cost = Marginal Cost, then...
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We are indifferent in the long run
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Factor Input Demand Function
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Qfi = h(P, Plabor, Pkapital, technology)
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Factor Input: we will start to hire when...
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P = Marginal Variable Product
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Factor input: we will produce if...
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Average Value Product > Price.
There is not short term or long term, this is just a firm condition.
There is not short term or long term, this is just a firm condition.
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what is econmics?
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The academic discipline that deals with the allocation of scarce resources to meet human needs and objectives
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substitution effect
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when consumers react to an increase in a good's price by consuming less of that good and more of other goods
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income effect
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the change in consumption resulting from a change in real income
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Market Demand Function
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Qd = f(Py, Px, Px2... Pn, I, T&P, # of C, Idist, T+Pd)
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Change in Supply
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The actual supply function changes, so the entire curve changes
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Change in quantity supplied
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If the curve changes, the supply curves changes but not the function.
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