# 1.4 Application to Economics

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cmarquardt94's
version from
2016-09-08 01:38

## Section 1

Question | Answer |
---|---|

What are the 3 Economic Functions? | Cost Function C(q), Revenue Function R(q), Profit Function |

what is "q" in the economic functions? | it is the input |

what is the cost function formula? | C(q) = Fixed Cost + Variable Cost |

Fixed cost is represented by the...? | Vertical intercept (y-intercept) |

Variable cost is the same as...? | Marginal Cost, Slope, Rate of Change |

How can we identify the Variable Cost in an equation? | it will be the one right next to the variable, such as "x" |

What is the Revenue Function, R(q) formula? | Revenue = price x quantity |

The cost function, C(q) is a () function? | Increasing Function |

what is the formula for the Profit Function? | Profit = Revenue R(q) - Cost C(q) |

## Section 2

Question | Answer |
---|---|

What is the Break Even Point? | it is when Profit is Zero |

What is true at the break even point ? | Revenue = Cost |

How do we find the Break Even Point? | Set the Cost Function C(q) equal to the Revenue Function R(q) and solve for q |

what does "Marginal" anything mean? | Rate of Change |

so Marginal (revenue|profit|cost) all refer to...? | how these change in response to ONE UNIT CHANGE IN QUANTITY |

## Section 3

Question | Answer |
---|---|

As prices increase....what happens? | Manufacturers(suppliers) are willing to supply MORE of a product, BUT the Quantity Demanded by consumers FALLS |

Why do we have two different curves? (supply | demand) | because manufacturers(suppliers) and consumers react differently to changes in price |

What variable is price? | Price is the independent variable on the Vertical Axis |

What variable is Quantity? | quantity is the dependent variable on the Horizontal axis (x-axis) |

Why is quantity the Dependent variable? | because the amount of a product that people are going to buy (consumers) or sell (suppliers) DEPENDS on the price of that item |

## Section 4

Question | Answer |
---|---|

What is the Supply Curve? | the quantity, (q), of an item that manufacturers(suppliers) are willing to MAKE, compared to the price for which they can sell it....it is also an Increasing Function |

What is the Demand Curve? | the quantity, (q), of an item demanded in relation to its price, (p) |

Is the Demand Curve and increasing or decreasing function? | Decreasing Function |

What is the Equilibrium Point? | point on the graph where the Supply and Demand Curves intersect of cross |

How do we solve for the Equilibrium Point? | set Supply equation = Demand equation and then solve |

What happens if Quantity Supplied is more than Quantity Demanded? | producers(suppliers) are making more than people are willing to buy - suppliers should lower prices - we expect the market to drive down the prices |

What happens if Quantity Demanded is more than Quantity Supplied ? | consumers are willing to buy more - Suppliers make more money by producing more - We expect the prices to raise (market pushes the prices up) |

Specific Tax | Tax imposed on producers(suppliers) and is a fixed amount per unit of a product sold - Regardless of the selling price (ie think ciggarettes / gasoline) |

Sales Tax | Tax imposed on consumers and is a FIXED PERCENTAGE of the selling price |

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