by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Total Product? Note that we have introduced some new language. We also call Output (Q) Total Product (TP), which means the amount of output produced with a given amount of labor and a fixed amount of capital.
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are Explicit Costs? We can distinguish between two types of cost: explicit and implicit. Explicit costs are out-of-pocket costs, that is, actual payments. Wages that a firm pays its employees or rent that a firm pays for its office are explicit costs. Implicit...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How do Budget Constraints Create Demand Curves? The budget constraint is a trade off based upon a finite budget or available resources. When the price of a good changes, the budget constraint changes. Individuals seeking maximum utility from their purchases will...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How do Changes in Price Affect Consumer Choices? A rise in price will affect the allocation of a limited budget. Generally, the utility maximizing choice will be the point at which the marginal utility received from the purchase of the next unit of each good is equal....
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How do Changes in Income Affect Consumer Choices? How does a rise in income affect a consumer’s utility-maximizing choice? When deciding the combination of two (or more) goods to purchase, the utility maximizing choice will be the point at which the marginal utility...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Market Structure? Market structure concerns how competitive is the industry. That is, it concerns the following factors: Market power of each firm (suppliers and buyers); Substitute products; Barriers to entry; Competitive rivalry It also concerns the number...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How do Technology Shifts affect the Long-Run Average Cost Curve? New developments in production technology can shift the long-run average cost curve in ways that can alter the size distribution of firms in an industry. New production technologies do not inevitably...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How does the Long-Run Average Cost Curve Affect Industry Competitors? The shape of the long-run average cost curve affects the size and number of firms that will compete in an industry. Where the LRAC curve has a flat-bottomed area of constant returns to scale....
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How do Costs relate to Diminishing Marginal Productivity? Adding additional factors of production (such as workers) generally leads to higher productivity. At some point, adding additional workers begins to add less and less productivity. Each factor of input has an...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Shape of the Average Long-Run and Short-Run Cost Curves? While in the short run firms are limited to operating on a single average cost curve (corresponding to the level of fixed costs they have chosen), in the long run when all costs are variable, they...
