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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)
memorize

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
memorize

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
memorize

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 TaxTax 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 TaxTax imposed on consumers and is a FIXED PERCENTAGE of the selling price
memorize

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