Economics

Microeconomics: Individual behaviour under the assumption of rational behaviour

Macroeconomics: Behaviour of the whole economy

Efficient market hypothesis: market prices reflect fully all available information

Opportunity cost is the value of the best alternative you must give up

Demand curve: relationship between price and quantity demanded

Demand influenced by: prices of substitutes and complements, income, tastes and preferences and expectations

Responsiveness of demand = Elasticity

Elasticity determined by number of substitutes, time, definition of the market

Elasticity = %-change in quantity demanded / % change in price

Consumer surplus: price you are willing to pay - actual price

Income elasticity = %-change in quantity demanded / %-change in income

Cross price elasticity = %-change in quantity demanded x / %-ch. in quantity demand y

Price discrimination

• 1st degree: different for each customer (not possible)
• 2nd degree: e.g. by volume (bulk)
• 3rd degree: grouping (business, economy)

In short run, one factor of production is fixed

In long run, all factors of production are variable (capital and labour)

Total product = total output produced

Marginal product = additional output after adding one more unit of input

SATC = STC / Output

SAVC = SVC / Output

SAFC = SFC / Output

SMC = Change in STC / Change in output

SMC always intersect with SATC in the minimum of SATC

The supply curve represents the positive relationship between the price of a product and the willingness of a firm to supply it