Economics & Glob Bus Apps Essay Example | Topics and Well Written Essays - 2000 words

Economics & Glob mint Apps - Essay ExampleTask 1 Relationship between fringy Revenue and Marginal represent Marginal taxation is delineate as the revenue generated by the sale of star extra social unit of a product. Whereas total revenue pith the entire revenue generated by the total quantity sold. (Sloman) Marginal represent is defined as the address of producing one extra unit of a product. Whereas total cost refers to the sum of all the expenses incurred by a company, to produce all the units of the product. (Sloman) Profit is the excess of revenue oer cost. Profit is defined as the return that a person gets on investment. In economics, there be three types of profit normal profit, abnormal profit and subnormal profit. (Sloman) However, the term profit maximizing means that a firm is operating at a point where the difference between its total revenue and total cost is highest. (Lipsey & Harbury, 1992) The profit maximizing firms produce where their marginal revenue equa ls their marginal cost. Now putting green sense will suggest producing where the revenue brought by an additional unit is the greatest and the corresponding cost is the lowest but at this point the total production and the total profit will be very low. Thus the firm will not be maximizing profit at all. So to fulfill the definition and requirement of profit maximization, a firm has to produce where MR=MC. In addition to that, MC and MR are the gradient functions of both TC and TR curves. So when both gradients get equal, the curves get parallel and the maintain between them becomes the greatest. (Lipsey & Harbury, 1992) If a profit maximizing firm is faced with a situation where its MC growings its MR, indeed it will have to reduce its production. This is due to the simple rule that MR reduces as the production increases and MC increases with it. So to get back to the equilibrium, the firm will have to reduce the production. (Lipsey & Harbury, 1992) On the other hand, if the fi rms MR exceeds its MC, then it will have to increase its production. This increase will cause the MR to fall and the MC to increase and the equilibrium will be attained. (Lipsey & Harbury, 1992) Task 2 Supply and Demand Concepts bouncyity of demand is defined as the measure of responsiveness of the demand of any good or service with a stir in its price. It can also be defined as a ratio of the percentage qualify in the demand and the percentage win over in the price. Elasticity of demand is of three types. Elastic demand is the demand that responds greatly to a small price change. Inrubber band demand shows a small change in quantity following a greater change in price. Unit elastic demand shows the same change in demand and price. Price Elasticity of Demand can be calculated by the following formula Percentage change in quantity demanded / Percentage change in the price. (Sloman) Cross price catch of demand gives us the effect on the demand of one good due to a change in the price of other good. Therefore, cross price elasticity of demand is a measure of the relationship between percentage changes in the demand of one