Providing an in-depth summary on “The firm and its customers” with definitions, graphs, exam-type questions, important information and the most important definitions, topics, graphs and formula to remember when it comes down to the exam.
measures the responsiveness or consumers to a price
change
total cost=
*
unit quantity
costx (((Q) (
total revenue pricex quantity (PQ)
=
*
profit total
* revenue total Costs (PG-TCL
=
-
Isoprofitcurve
* < the combinations of P and &
that give the same profit
MRS
* > Slope of ISOPOSItCurve
> trade oof
you are willing to make between p and &
demand
* curve > What
Is feasible (FF)
MRT
* - slope of demand curve
> trade-off you are constrained to make between price and quantity
The
* profitfunction > the profit you would achieve lo you choose to produce
a quantity (a) and Set
the highest price thatwould
enable you to sell thatquantity, according to the
demand ounction.
The
* Production function > the relationship by which inputs are combined
to produce OUIDHES
InDUtS
* >Capital, labour, raw materials
The
* SHOVE
rUR - the period
longest of time during which atleast one of
Production IS a
the Inputs be
cant varied function of labour
In the Short
run
> fixed Input(machinery, CaDItaK a F(k0,L)
=
The
* long run - the shortestperiod or time required to alter the amounts
production IS a
of all Inputs In the process FURCtION Of IGDOUr
and capital In the
> variable Inputs (labour) long run
a F(k,L)
=
Marginal
* product
( the change In the total productwhen hiring one more labourer
- slope of total productcurve
> MP B
=
- reaches max Pol
at of
total product curve
cuses fewer
large-scale
*
production is more profitable ( technological advantages InDUES Per
WHIEOf OUEPUt)
> cost advantages (fixed costs have a smaller
effecton the Cost per Unit)
economies
* of scale <when doubling all oo the Inputs to a production process more
than doubles the output, the firm exhibits Increasing returns
> technological advantage
->
Increasing returns
- can resultfrom specialisation
diseconomies
*
of scale > When doubling all Inputs to a production function less than
doubles the output, firm exhibits decreasing returns
>
diminishing marginal returns
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