Microeconomic topics Consumer and producer surplus Demand Substitute goods Complements Economies of scale Elasticity Price elasticity of demand Cross elasticity of demand Income elasticity of demand Price elasticity of supply Market equilibrium Production possibility frontiers Positive and normative statements Opportunity cost Specialisation and division of labour Market failure Positive externalities – the benefit to a …
The short run, long run and very long run are different time periods in economics. Quick definition Very short run – where all factors of production are fixed. (e.g on one particular day, a firm cannot employ more workers or buy more products to sell) Short run – where one factor of production (e.g. capital) …
An assumption in classical economics is that firms seek to maximise profits. Profit = Total Revenue (TR) – Total Costs (TC). Therefore, profit maximisation occurs at the biggest gap between total revenue and total costs. A firm can maximise profits if it produces at an output where marginal revenue (MR) = marginal cost (MC) Diagram …
An appreciation means an increase in the value of a currency against other foreign currency. An appreciation makes exports more expensive and imports cheaper. An example of an appreciation in the value of the Pound 2009 – 2012 Jan 2009 If £1 = €1.1 June 2012 £1 = €1.27 In this case, we can say …
Tax incidence refers to how the burden of a tax is distributed between firms and consumers (or between employer and employee). The tax incidence depends upon the relative elasticity of demand and supply. The consumer burden of a tax increase reflects the amount by which the market price rises. The producer burden is the decline …
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