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Price Elastic
- is a more than 1 percent change in Qd in response to a 1 percent change in price (P,TR inverse)
- Ed > 1
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To calculate Elasticity (Ed)
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Price Inelastic
- is a less than 1 percent change in Qd in response to a 1 percent change in price (P,TR direct)
- 0<Ed<1
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Unit Elastic
- is a 1 percent change in Qd in response to a 1 percent change in price (TR, unchanged,TR maximized)
- Ed=1
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Perfectly Elastic
An extreme case in which the demand curve is horizontal and the elasticity coefficient equals infinity
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Perfectly Inelastic
An extreme case in which the demand curve is vertical and the elasticity coefficient equals 0
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Explicit Costs
the actual payments a firm makes to its suppliers of inputs
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Implicit Costs
the firms oppertunity costs of all the resources supplied by the firms owners
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TFC, TVC, TC
TC = TFC+TVC
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Accounting Profit
TR - Explicit Costs
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Economic Profit
TR - (Explicit + Implicit)
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ATC, AVC, AFC
- ATC=TC/Q
- AVC=TVC/Q
- AFC=TFC/Q
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