Class Notes (834,143)
United States (323,639)
HON 1302 (18)
Tomic (18)
Lecture 19

HON 1302 Lecture 19: In-Class Review for Quiz #3
Premium

4 Pages
36 Views
Unlock Document

Department
HON - HONORS
Course
HON 1302
Professor
Tomic
Semester
Spring

Description
Microeconomics Review for Quiz #3 Includes material from Quizzes 1, 2, and 3 Supply and Demand 1. Consider the market for cars, which use steel in production. If the cost of steel increases, what is the effect on supply and/or demand? a. The cost of steel is part of the cost of production for car companies b. Costs of production is a determinant of supply, thus supply is affected c. Since cost of production increases, supply decreases d. As a result, equilibrium price increases and equilibrium quantity decreases Elasticity and Percentage Changes 1. Elasticity of demand = percentage change in quantity/ percentage change in price a. Shows you the how much the quantity changes as a result in the change in price 2. If you know the elasticity, you can know how total will be affected 3. If elasticity is… a. Less than 1 = inelastic good i. If good is inelastic, a firm should raise prices to increase total revenue b. Equal to 1 = unity elasticity i. If good has unity elasticity, one cannot raise revenue by changing prices, so instead the firm should focus on decreasing costs of production c. Greater than 1 = elastic good i. If good is elastic, a firm should decrease prices to increase total revenue 4. Cross elasticity of demand = percentage change in quantity of Product A / percentage change in price of Product B a. Shows how strongly two goods are either complements are substitutes 5. If cross elasticity is… a. Less than 0 = two goods are complimentary b. Greater than 0 = two goods are substitutes Costs and Revenues for a Firm • Total Cost (TC) – the sum of all costs in production o TC = Costs X Quantity o Calculated by finding the area under the average costs curve on the graph • Total Revenue (TR) – the sum of all money received from sale of goods o TR = Price X Quantity o Calculated by finding the area under the average revenue curve on the graph • Average Cost (AC) – the sum of all costs divided by the quantity of goods sold o AC = TC/Q • Average Revenue (AR) – the sum of all money received from sales divided by number of goods sold o AR = TR/Q • Marginal Costs (MC) – the additional cost of producing one unit o MC = Change in Costs / Change in Quantity • Marginal Revenue (MR) – the additional revenue received from selling one additional unit o MR = Change in Revenue / Change in Quantity • Graphs: • How does a firm choose how many units to produce? o Produce where marginal costs equal marginal revenue o The reason for this is because you want to produce up to the point where the revenue received from the sale of a good is less than the costs needed to produce that good o If the costs incurred in producing the good is greater than the additional revenue you will receive, you will start having losses for each unit made Market Structures • Perfect Competition o An id
More Less

Related notes for HON 1302

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit