Total Revenue: Total amount of money a company receives from selling services.
Marginal Revenue: Additional income from selling one more unit of a good.
Fixed Cost: A cost that does not change no matter how much of a good is produced.
Variable Cost: A cost that rises or falls depending upon how much is produced. Ex: Electricity Bill
Elastic Demand:
- Demand that is very sensitive to a change in price
- Product is not a necessity
- There are available substitutes
- Ex: Soda, steaks, fur coats
- E > 1
Inelastic Demand:
- Demand that is not very sensitive to a change in price
- Product is a necessity
- There are few or no substitutes
- Ex: Gas, sugar
- E < 1
Unitary Elastic:
- E = 1
Price Elasticity of Demand:
Step 1: Quantity
New Q - Old Q
Old Q
Step 2: Price
New P - Old P
New P
Step 3: PED
% change in quantity
% change in price
Supply Problem Formulas:
TFC+TVC=TC
AFC+AVC=ATC
TFC/Q=AFC
TVC/Q=AVC
TC/Q=ATC
AFC*Q=TFC
AVC*Q=TVC
TC-TFC=TVC
NEW TC-OLD TC= MC
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ReplyDelete-Fatima Shariff