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Questions and Answers
What does the law of supply primarily describe?
What does the law of supply primarily describe?
Which of these factors does NOT influence the price elasticity of demand?
Which of these factors does NOT influence the price elasticity of demand?
What does the term 'elastic' demand imply about consumer behavior?
What does the term 'elastic' demand imply about consumer behavior?
If a product has a positive own-price elasticity, which is true?
If a product has a positive own-price elasticity, which is true?
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What does 'inelastic' demand imply about the consumer?
What does 'inelastic' demand imply about the consumer?
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Which term relates to how responsive the quantity supplied is to a change in price?
Which term relates to how responsive the quantity supplied is to a change in price?
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What does the law of demand primarily describe?
What does the law of demand primarily describe?
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Which concept is not directly related to the calculation of price elasticity?
Which concept is not directly related to the calculation of price elasticity?
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Study Notes
AREC 323 Lecture 1: Review of Economic Concepts
- Course name: AREC 323
- Lecture: 1
- Topic: Review of economic concepts, including supply and demand, cost, revenue, profit, elasticity, and derivative rules
Outline
- Supply and Demand
- Definition and elasticity
- Product characteristics (substitutes and complements)
- Cost
- Total cost (TC), fixed cost (FC), variable cost (VC)
- Average cost (AC), average fixed cost (AFC), average variable cost (AVC), marginal cost (MC)
- Formula for calculating various costs
- Revenue
- Total revenue (TR)
- Average revenue (AR)
- Marginal revenue (MR)
- Profit
- Economic profit and accounting profit
- Elasticity
- Own-price elasticity of demand (PED)
- Definition and calculation
- Relationship between price and quantity demanded (inverse)
- Own-price elasticity of supply (PES)
- Definition and calculation
- Relationship between price and quantity supplied (direct)
- Cross-price elasticity of demand (PEDxy)
- Definition and calculation
- Relationship between price of one good and quantity demanded of another (substitutes, complements)
- Own-price elasticity of demand (PED)
- Derivative rule
- Constant and power rules for calculating derivatives
Supply and Demand
-
Supply:
- Definition: The quantity of a good or service producers are willing and able to offer at various prices during a specific period.
- Law of Supply: Positive relationship between price and the quantity supplied (as price rises, quantity supplied rises).
-
Demand:
- Definition: The quantity of a good or service consumers are willing and able to purchase at various prices during a specific period.
- Law of Demand: Inverse relationship between price and quantity demanded (as price falls, quantity demanded rises).
Elasticity
- Own-price elasticity of demand (PED): Measures the responsiveness of quantity demanded to changes in price. Calculated as the percentage change in quantity demanded divided by the percentage change in price.
- Own-price elasticity of supply (PES): Measures the responsiveness of quantity supplied to changes in price. Calculated as the percentage change in quantity supplied divided by the percentage change in price.
- Cross-price elasticity of demand (PEDxy): Measures the responsiveness of quantity demanded of good Y to a change in the price of good X.
Cost
- Total Cost (TC): The sum of fixed costs (FC) and variable costs (VC).
- Fixed Costs (FC): Costs that do not vary with the level of production (e.g., rent, insurance).
- Variable Costs (VC): Costs that vary directly with the level of production (e.g., raw materials, labor).
- Average Cost (AC): TC divided by quantity (Q).
- Average Fixed Cost (AFC): FC divided by Q.
- Average Variable Cost (AVC): VC divided by Q.
- Marginal Cost (MC): The additional cost of producing one more unit of output.
Revenue
- Total Revenue (TR): Price (P) multiplied by quantity (Q).
- Marginal Revenue (MR): The change in TR from selling one more unit of output.
Profit
- Profit: Total Revenue (TR) minus Total Cost (TC).
- Economic Profit: Sales revenue minus economic cost (explicit costs plus implicit costs).
- Accounting Profit: Sales revenue minus explicit costs.
Practice Problems
- Example problem: Calculating own-price elasticity of demand.
- Example problem: Calculate profit given TC and demand equations.
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Description
This quiz covers the foundational economic concepts discussed in AREC 323 Lecture 1, including supply and demand, cost structures, revenue dynamics, and elasticity. Test your understanding of essential principles such as profit calculations and different types of costs. Perfect for students looking to solidify their knowledge in economics.
