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BE Notes

The document discusses several key concepts in microeconomics and business economics. It covers topics like opportunity cost, marginal analysis, demand and supply analysis, elasticity, utility theory, and more. Some of the main points are: - Opportunity cost refers to the cost of the next best alternative forgone when making a decision. - Microeconomics analyzes the behavior of individual consumers and firms as well as market equilibrium. - The law of demand states that, assuming other factors are constant, price and quantity demanded of a good are inversely related. Demand curves slope downward from left to right. - Supply curves normally slope upward from left to right, indicating that as price increases, quantity supplied

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0% found this document useful (0 votes)
74 views3 pages

BE Notes

The document discusses several key concepts in microeconomics and business economics. It covers topics like opportunity cost, marginal analysis, demand and supply analysis, elasticity, utility theory, and more. Some of the main points are: - Opportunity cost refers to the cost of the next best alternative forgone when making a decision. - Microeconomics analyzes the behavior of individual consumers and firms as well as market equilibrium. - The law of demand states that, assuming other factors are constant, price and quantity demanded of a good are inversely related. Demand curves slope downward from left to right. - Supply curves normally slope upward from left to right, indicating that as price increases, quantity supplied

Uploaded by

Lund Mera
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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 Opportunity cost is cost of foregone opportunity.

 A rupee tomorrow is worthless than a rupee today relates to discounting principle.


 Equal consideration to both short and long term goals or analysis of long run and short run
affects of decisions on revenue as well as costs is based on principle of time perspective.
 Incremental principle is closely related to the marginal cost and marginal revenue of
economic theory
 An input should be so allocated that the value added by the last unit is the same in all cases
which is equal marginal principle.
 Price theory is related to microeconomics.
 Business economics is micro in nature
 Normative signs deals with what out to be
 Microeconomics is concerned with the overall performance of the economy
 Cause and effect relationship is the future of economics explains that it can be treated as a
science
 Welfare definition of economics is given by Alfred Marshall
 Adam Smith is known as father of economics
 In economics we use the term scarcity to mean relay to scarcity that is scarcity in relation to
wants of this society.
 Economics uses money as a measuring rod for quantifying variables
 Business economics is involves practical application of economic theory in business decision-
making an incorporates tool from multiple discipline’s
 Additional utility the right from the consumption of an additional unit of a commodity is
called marginal utility
 Marshall gave the cardinal concept of utility
 Love diminishing marginal utility is the first law gossen
 The ability of satisfying human want in a goods is called utility
 Law of equal marginal utility is called law of substitution
 Necessities goods, price fall does not make any increasing in demand
 law of diminishing marginal utility, the more consumption of a product, the smaller is the
marginal utility from the consumption
 Diminishing marginal utility is the basis of law of demand
 Indifference curve convex to origin, due to continuous decline of marginal rate of
substitution
 Hicks and Allen believed that utility can be measured in ordinal numbers
 Business economics is economics applied to decision making
 The subject business economics is concerned with decision making of business economic
activities
 Incremental cost means the change in the total cost and incremental revenue means the
change in the total revenue
 Opportunity cost are the cost of sacrificed alternatives
 Economics as a positive science is neutral between ends
 Micro economics is concerned with the behaviour of individual entities
 Lionel Robbins expressed the view that economics is neutral between ends
 Macroeconomics is also called as income and employment theory
 When there are no alternatives, opportunity cost for that decision is zero or nill
 Wealth definition is stated by Adam Smith
 Paul Samuelson gave the growth definition in economics
 Micro economics is the study of individual economic unit
 Full employment is the important assumption of micro economics
 The credit of development of macro economic approach must go to Lord Keynes
 Micro and macro approaches are complementary
 Ceteris paribus means some things change
 Growth theory is the subject matter of macroeconomics
 Total utility is an aggregate measure of satisfaction gained from consumption
 Marginal utility is a measure of the change in satisfaction gained from consumption as a
result of a change in consumption
 Business economics is also known as managerial economics
 Total revenue is price quantity
 Father of business economics Adam Smith
 Economics is derived from greek word eco means home nomos means accounts
 Economics is about the study of scarcity and choice
 In economics demand refers to quantity demanded it is specific price during a particular
period of time
 The law of demand assuming other things to remain constant establishes the relationship
between price of a good and the quantity demanded
 Market demand is derived from individual demand curve by horizontal summation
 Contraction of demand is result of increasing the price of good concerned
 Increase and decrease in demand refers to right ward or leftward shift of a demand curve
 In the case of a given good, the demand curve will be upward sloping to right
 The price elasticity of demand is defined as responsiveness of quantity demanded to a
change in price
 Tea and coffee have positive cross elasticity of demand with, respect to each other
 When demand is elastic than percentage change in demand to a change in price is greater
 If a good is luxury it's income elasticity of demand is positive and greater than 1
 In case of an inferior good, the income elasticity of demand is negative
 If the demand for a good is in elastic, and increase in its price will cause the total
expenditure of the consumers of the goods to increase
 Is right line downward sloping demand curves implies that, as price falls the elasticity of
demand decreases
 The law of demand implies that as price falls quantity demanded expands
 Demand curves are derived while holding income, taste, and the price of other goods
 A decrease in the quantity supplied is represented by a moment down the supply curve
 When demand equals supply it is referred to as market equilibrium
 A price below the equilibrium price results in a short age
 Law of demand is a quantitative statement
 For normal goods law of demand States the relationship between price and quantity of
goods indirect
 Fallen income fallen number of buyers falling taste of consumer at the following for a reason
of fall in demand
 Contraction in demand appears when price rises and demand falls
 Demand of a commodity has inverse relationship with the price of the commodity
 Demand of a commodity which is dependent on the demand of another commodity is said
to have derived demand
 Increase and decrease of demand takes place due to change in factors other than price of
the
 The curve of unitary elastic demand is called rectangular hyperbola
 Labour supply curve is an exception to the supply curve
 Income effect results in the change in the purchasing power
 Multiple uses of a commodity makes the elasticity of demand highly elastic
 Market supply schedule is a horizontal or lateral summation of individual supply schedule
 Demand for commodity has a positive relationship with income
 Market equilibrium is acquired when demand and supply are equal
 Necessities have relatively in elastic price elasticity
 Shifts in supply curve takes place due to changes in factors other than the price of the good
 Desire for a commodity should be back by ability to pay and willingness to pay to be call as
effective demand
 the value of elasticity at midpoint of a straight line method curve is EP equals to 1
 Veblen goods are exemption to the law of demand because when their price rises their
demand increases
 Cross elasticity exist between substitutes and complementary goods
 The two types of demand schedule are individual and market
 the demand for salt is inelastic
 A desire back by ability to pay and willingness to pay for a commodity is called demand
 Implicit demand is also known as derived

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