Praxis Business 5101 Economics Section Latest Update Graded A

Praxis Business 5101 Economics Section Latest Update Graded A microeconomics shows how individuals and small organizations act and make decisions elasticity how one variable changes in response to another price elasticity of demand formula PED=(%change in the quantity demanded / (%change in the price) inelastic increased price will result in increased revenue scarcity limited resources for unlimited wants in people scarce resources land, labor, and capital scarce fewer units available than the amount people want factors of production land, labor, capital, and entrepreneurship diminishing returns as one factor of input is increased, eventually the marginal or incremental output will start to decrease. economies of scale as the volume of output increases, it costs less per unit to produce it economies of scope it is cheaper to produce a range of products rather than just one. The company can take advantages of overhead already spent company size larger companies get lower per unit cost equilibrium demand is equal to supply. opportunity cost what a company gives up by choosing a different path. gives a comparative advantage for a product supply how much of a good or service the market has to offer to buyers law of supply the higher the price of a good, the more of it the producers are willing to make demand how much of a good or service buyers want law of demand the higher the price, the lower the demand Adam Smith founder of modern economics; classical economics. Wealth of Nations written by Adam Smith Circular flow of economic model simplified way money and products make their way through the economy price where supply equals demand on the demand curve marginal benefits the utility or satisfaction an individual gets from one more unit of a service or good. amount a person will pay for an extra unit marginal costs how much it costs to make one more unit of something perfect competition all companies make the sam product; no one firm has a large market share and no control over pricing. monopolistic competition many different producers that sell similar, although not identical products; restaurants oligopoly only a small amount of businesses supplying a product so there is limited competition monopoly one company is the only provider of a product cost leadership company charges less for the product to attract more customers penetration pricing business offers a low cost initially to get customers and slowly raises it economy pricing company strives to offer the lowest cost through the most basic items skimming initial price is high then goes down bundle pricing a variey of products are offered toegher promotional pricing sales differentiation company produces a unique product macroeconomics looks at the entire economy GDP, prices and inflation economic indicators statistics that provide information about economic activity aggregate supply and demand price level for the country as a whole deflation when the general price of goods and services go down inflation when the general price of goods and services goes u