Understanding Economic Concepts and Theories

Perf Elasticity

(Edp=8) when a minute change in price brings infinite change in Qd, demand is considered to perf elastic. Coefficient of elasticity of demand is equal to infinity here. Parallel to X-axis

Highly Elastic Demand

when a small percentage change in price results in high % change in Qd is highly elastic in nature, coefficient of elasticity in demand is greater than one.

Perf Inelastic Demand

when a big % change in price in price fails to bring any change in Qd the demand id perf inelastic. equal to 0.

Law Of Supply

other than things remaining the same, when price of a commodity increases its quantity supply also increases, and when price of commodity decreases its quantity supply also decreases.

Market Equilibrium

it is a state of balance or a state of rest. it is a point at which two opposite forces are in balance, so that there is no tendency to change. In case of market equilibrium these two opposite forces are Demand & Supply.

Relation between AC and MC

AC decreases, MC is <. AC is minimum, MC is =. AC increasing, MC is > then AC.

Perf Competition

• Very large no. of producers.
• Producers are price takers.
• Products are homogeneous.
• Perfect information.
• Perfect mobility.
• Free entry & exit.
• No role of govt.

Scarcity

is the fundamental economic problem of having seemingly unlimited human wants and needs in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs.

Economics

is the study of how societies, governments, businesses, households, and individuals allocate their scarce resources. Our discipline has two important features. First, we develop conceptual models of behavior to predict responses to changes in policy and market conditions.

Marginal Revenue Productivity Theory of Wages

is a theory in neoclassical economics stating that wages are paid at a level equal to the marginal revenue product of labor, MRP (the value of the marginal product of labor), which is the increment to revenues caused by the increment to output produced by the last ...