Micro and Macro Economics PDF
Micro and Macro Economics PDF
Micro and Macro Economics PDF
Meaning
Demand Analysis
Types of demand
Latent demand: Consumers may share a strong need that cannot be satisfied by
any existing product.
For examples: Harmless cigarette, safer neighborhood,more fuel efficient car.
Declining demand: When the demand of the product or service becomes lower.
For examples Private colleges have seen application falls.
Full demand: When the organization is pleased with their volume of business.
For example Ideal Situation where supply is equal to demand.
Overfull demand: Demand level is higher that the organization can and want
to handle.
For example National park is terribly overcrowded in the summer.
Law of demand:
Demand Curve
2.
3.
10
Law of Supply:
Supply is derived from a suppliers desire to maximize profits.
P- Price
Q-quantity
11
ii.
Technology
iii. Weather
12
Equilibrium Point
Ep
Eq
13
Opportunity cost
Since every resource can be put to alternative uses, every action, choice,
or decision has an associated opportunity cost.
Examples
Contd
The opportunity cost of going to college is the money you would have earned
if you worked instead. On the one hand, you lose four years of salary while
getting your degree; on the other hand, you hope to earn more during your
career, thanks to your education, to offset the lost wages.
In the short run, there are both fixed and variable costs.
Efficient long run costs are sustained when the combination of outputs that
a firm produces results in the desired quantity of the goods at the lowest possible
cost.
Variable costs change with the output. Examples of variable costs include
employee wages and costs of raw materials.
The short run costs increase or decrease based on variable cost as well as the rate of
production. If a firm manages its short run costs well over time, it will be more
likely to succeed in reaching the desired long run costs and goals.
variable cost
A cost that changes with the change in volume of
activity of an organization.
fixed cost
Business expenses that are not dependent on the
level of goods or services produced by the business.
/
Short run costs are accumulated in real time throughout the production
process.
Fixed costs have no impact of short run costs, only variable costs
and revenues affect the short run production. Variable costs change with the
output.
Marginal cost
The change in total cost that comes from making or producing one additional
item.
Utility
Marginal utility
The additional satisfaction a consumer gains from consuming one more unit of
a good or service.
Contd
Quantity (Q)
1
2
3
4
5
Total Utility
100
170
190
180
140
Marginal Utility
100
70
20
-10
-40
In the above example, total utility (190) is maximized after just three pieces of chocolate cake.
Macro-economics
GNP
Gross domestic product (GDP) is the monetary value of all the finished goods
and services produced within a country's borders in a specific time period.
Though GDP is usually calculated on an annual basis, it can be calculated on
a quarterly basis as well.
GDP = C + G + I + NX
where