Eco 2 marks

Indifference curve: and properties 0

According to indifference curve analysis, consumer is in equilibrium when his marginal rate of
substitution between the two goods is equal to the price ratio between them. That is.

Production function: 0
In simple words, production function refers to the functional relationship between the quantity of
a good produced (output) and factors of production (inputs).
“The production function is purely a technical relation which connects factor inputs and output.”
Prof. Koutsoyiannis

Economies & diseconomies of scale: 0

Economies of scale occur in a business when costs per unit of a product decreases as the
business expands. Diseconomies of scale happen when production costs increase per product
as the business expands. Companies must balance the economies of scale vs. diseconomies of
scale while they are looking to grow.

Budget line: 0
A budget line is a locus of points showing alternative combinations of two goods that can be
purchased with a fixed amount of money income and fixed prices of the two goods.

Conditions of equilibrium: 0
In economics, economic equilibrium is a situation in which economic forces such as supply and
demand are balanced and in the absence of external influences the (equilibrium) values of
economic variables will not change

Perfect competition: 0
Perfect competition occurs when there are many sellers, there is easy entry and exiting of firms,
products are identical from one seller to another, and sellers are price takers.
Example: agriculture market
● Large numbers of buyers and sellers in the market.
● Free entry and exit of firms in the market.
● Each firm should be selling a homogeneous product.
● Buyers and sellers should possess complete knowledge of the market.
● No price control.

DEFINE BUSINESS ECONOMICS 0

According to Mc Nair and Meriam, “Business Economics consists of the use of economic modes
of thought to analyse business situations.”

CONSTRAINED OPTIMIZATION 0
Constrained optimization (in some contexts called constraint optimization) is the process of
optimizing an objective function with respect to some variables in the presence of constraints on
those variables

UNCONSTRAINED OPTIMIZATION 0
Unconstrained optimization consists of minimizing a function which depends on a number of real
variables without any restrictions on the values of these variables. When the number of variables
is large, this problem becomes quite challenging.

LAW OF DEMAND 0
The law of demand describes the relationship between the quantity demanded and the price of a
product. It states that the demand for a product decreases with increase in its price and vice
versa, while other factors are at constant. Therefore, there is an inverse relationship between the
price and quantity demanded of a product.

ELASTICITY OF DEMAND. 0 According to Alfred

Marshall: "Elasticity of demand may be defined as the percentage change in quantity demanded
to the percentage change in price." The variables on which demand can depend on are:
Price of the commodities
Price of related commodities
Consumers income etc

CONSUMER BEHAVIOUR 0
Consumer behaviour is the study of individuals, groups, or organisations and all the activities
associated with the purchase, use and disposal of goods and services

Basic tools for decision making:

1. Opportunity cost
2. Incremental principle
3. Principle of the time perspective
4. Discounting principle
5. Equi-marginal principle

Law of diminishing marginal utility

One of the characteristics of human wants is their limited intensity. As we have more of
anything in succession, our intensity for its subsequent units diminishes. This generalization of
satiable wants is known as the Law of Diminishing Marginal Utility.
Supply
Supply means the quantities that a seller is willing and able to sell at different prices. It is
obvious that if the price goes up, he will offer more for sale. But if the price goes down, he will be
reluctant to sell and will offer to sell less.

Determinates of demand:
Demand is not dependent on price alone.
There are,
● Price of the product
● Income of the consumer
● Price of related good
● Consumer tastes and preferences
● Expectation of future prices
● Economics conditions

Isoquants
Isoquants Curves represent various input combinations which produce the same levels of output.
The producer can choose any of these combinations available to him because their outputs are
always the same. Thus, we can also call them equal–product curves or production indifference
curves.

Property of Isoquants
● Isoquants do not intersect nor are tangent to each other:
● Isoquants have a negative slope
● Isoquants are convex to origin
● Upper isoquants represent, a higher level of output:

Total Cost
In economics, the total cost (TC) is the total economic cost of production. It consists of variable
costs and fixed costs. Total cost is the total opportunity cost of each factor of production as part
of its fixed or variable costs.

Variable cost
Variable cost (VC) changes according to the quantity of a good or service being produced. It
includes inputs like labor and raw materials.

Fixed cost
Fixed costs (FC) are incurred independent of the quality of goods or services produced. They
include inputs (capital) that cannot be adjusted in the short term, such as buildings and
machinery. Fixed costs (also referred to as overhead costs)
machinery. Fixed costs (also referred to as overhead costs)

Full cost pricing

The Full-Cost Pricing method is generally adopted by many of the firms for its simple and easy
procedure. This method is also called Cost-plus pricing, Margin pricing and Mark-up pricing.

Target pricing
This method of pricing is only a refinement of the full-cost pricing. According to this method, the
manufacturer considers a pre-determined target rate of return on capital invested.

Going rate pricing

This method of pricing conforms with the system of pricing in oligopoly where a firm initiates
price changes and the other firms the industry merely follow the pattern set by the leader.
Market laa current laa evalo pricing vekirangalo adhey pricing base panni namma price veppom

Marginal cost pricing

Under marginal pricing method, the price of a product is determined on the basis of the marginal
or variable costs

Dual pricing
generally a double pricing system is followed higher price, called 'peak-load price' (P3) is
charged during the 'peak-load' period and a lower price (P₁) is charged during the 'off-peak'.

Skimming pricing
Skim pricing, also known as price skimming, is a pricing strategy that sets new product prices
high and subsequently lowers them as competitors enter the market. Skim pricing is the opposite
of penetration pricing,

Penetration pricing
Penetration pricing is a marketing strategy used by businesses to attract customers to a new
product or service by offering a lower price during its initial offering

Price discrimination
This policy of the monopolist is called price discrimination.
“Price discrimination exists when the same product is sold at different prices to different buyers.

Monopoly
In a monopoly type of market structure, there is only one seller, so a single firm will control the
entire market. It can set any price it wishes since it has all the market power. Consumers do not
have any alternative and must pay the price set by the seller.

Oligopoly
Oligopoly
In an oligopoly, there are only a few firms in the market. While there is no clarity about the
number of firms, 3-5 dominant firms are considered the norm. So in the case of an oligopoly,
the buyers are far greater than the sellers.

Cartels
A cartel is defined as a group of firms that gets together to make output and price
decisions. cartel is a partnership between two or more companies whose goal is to manipulate
the market and cost of goods to their advantage.

Selling cost
The costs incurred on advertising, publicity and salesmanship arc known a~ selling costs, Selling
costs have been defined “as the costs necessary to persuade a buyer to buy one product rather
than another or to buy from one seller rather than another.

Dumping
Dumping is international price discrimination in which an exporter firm sells a portion of its
output in a foreign market at a very low price and the remaining output at a high price in the
home market.