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Microeconomics A study of decisions of individuals and firms in relation to the scarcity of resources in the market. Macroeconomics The study of decisions made in the whole economy, its benefits, and consequences. (Government and industries General Motors Exa...

Opportunity Cost The next best alternative that is given up while making a decision or choice. Example: If I spend $10 buying a coffee, what are the other options that I could get other coffee? The opportunity cost of buying the coffee at a cafe could be a Don...

Demand is negatively correlated with price. If price increases, demand will decrease. Ceteris paribus (All other variables are constant). The table below shows price – demand correlation. The shift along the curve shows the demand-price correlation; when price...

Amount of good that sellers are willing and able to sell at a given time. Marginal Cost VS Marginal Benefit for the seller. Wheet example: Law of supply: Quantity supplied is positively correlated to price. As price increases, the quantity increases. Shifts ...

Market Equilibrium Market equilibrium is a state in a market where the quantity of a good or service demanded by consumers equals the quantity supplied by producers. At this point, the market price is stable, and there is no tendency for it to change in the ab...

Consumer and Producer Surplus Consumer and producer surplus are measures of the economic benefits that consumers and producers receive from participating in a market. Consumer Surplus The difference between the maximum price consumers are willing to pay for a ...

Elasticity in economics measures the responsiveness of one variable to changes in another variable. It is often used to analyze how quantity demanded or supplied changes in response to price changes. Price Elasticity of Demand (PED) Measures the responsiveness...

Government Policies and Market Equilibrium Governments can intervene in markets using policies such as taxes, price floors, and price ceilings, which interact with the invisible hand of prices[cite: 238]. While the equilibrium point in a free market maximizes ...

Assume all firms have a common goal of maximizing profit. Revenue = quantity x price Explicit costs: All costs incurred during production of the good/service Rent, material costs, labor, etc. Implicit Costs: Opportunity cost Economic profit: Revenue – (Imp...

Variable Costs: Costs that depend on how many scooters are produced Raw materials, Labor, electricity Fixed Costs: Costs that are incurred regardless of quantity of scooters produced. Rent, Higher level managers Sunk Costs: Money that is spent and does no...

Cattle farmer – Likely a perfectly competitive market. Profit maximization point: AR = MR At Q2, The firm is not making maximum profit. Because the firm can still sell more product while having MR > MC for each additional good produced. At Q1, The firm...