PORTFOLIO IN

MICROECONOMICS
Course No.

Submitted by:

DANIELLA GALLARDO
BSBA-2B

Submitted to:

REMY ANDRADA
Designation
 TABLE OF CONTENTS
I. TITLE PAGE
II. Table of Contents
III. Cover Letter
IV. TOPICS
A. Lesson 1
Theory of Consumer Behavior
 Keywords/Keyconcepts/Summary . . . . . . . . . . . . . . .1
 Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
B. Lesson 2
Theory of Production
 Keywords/Keyconcepts/Summary . . . . . . . . . . . . . .
 Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
C. Lesson 3
Cost of Production
 Keywords/Keyconcepts/Summary . . . . . . . . . . . . . . 7
 Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
D. Lesson 4
The firm and profit maximization
 Keywords/Keyconcepts/Summary . . . . . . . . . . . . . .
 Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E. Lesson 5
Marketstructure.. . . . . . . .. . . .. . . . . . . . .
 Keywords/Keyconcepts/Summary . . . . . . . . . . . .
 Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

V. GENERAL REFLECTION
VI. Grading Rubrics
COVER LETTER
LESSON 1
THEORY OF CONSUMER BEHAVIOR

 KEYWORDS/KEYCONCEPTS

Consumer Behavior-Assumptions
 Rational Consumer
 Budget Constraints
 Consumer Preferences

The Utility Theory of Demand

 The utility theory explains consumer behavior in relation to the satisfaction that a
consumer gets the moment he consumes a good.
 . This theory was developed and introduced in 1870 by a British Economist,
William Stanley Jevons. When we speak of utility in economics, we refer to the
satisfaction or benefit that a consumer derives of his consumption. The utility
theory of demand assumes that satisfaction can be measured.

Total Utility
 refers to the total satisfaction that a consumer derives from consuming a good.
Total utility depends upon the quantity that a person consumes.

Law of Diminishing Marginal Utility

 The fundamental assumption of utility theory of demand is that the satisfaction
that a person derives in consuming a particular product diminishes or declines as
more and more of a good is consumed.
  In other words, as successive quantity of goods is consumed, the utility we derive
diminishes. This is called the law of diminishing marginal utility.

Marginal Utility
 refers to the extra satisfaction a person derive resulting from an extra or
additional consumption.

Indifference Preference Theory

 Another theory explaining consumer behavior is the indifference preference
theory. Economist Vilfredo Pareto developed this modern approach to
consumer behavior.

Indifference Curve
 An indifference curve is a locus of points each of which represents a
combination of goods and services that will give equal level of satisfaction to
a consumer.

Properties of Indifference Curve

 Slopes downward to the right (negative slope)
 Convex to the origin
 Indifference curve in the indifference map does not meet or intersect
ACTIVITIES
LESSON 2
THEORY OF PRODUCTION

 KEYWORDS/KEYCONCEPTS/SUMMARY

Production
 the process of converting inputs into desired output.
 the process of producing goods for consumer satisfaction.

Production Function
 It describes the relationship between input and output.
Input
 refers to those which the firm uses in the process of producing goods and
services.
Output
 refers to any produced commodities

SHORT-RUN PRODUCTION
Fixed Inputs
 refers to inputs such as land, plant assembly machineries and equipment,
which does not change or remain fixed.

Variable Inputs
 resource or factor of production which can be changed in the short run by a firm
as it seeks to change the quantity of output produced. Most firms use
several variable inputs in short-run production, especially labor,
material inputs, and energy.
Total product
 is the overall quantity of output that a firm produces, usually specified in relation
to a variable input.

Marginal product
 s the change in output resulting from employing one more unit of a particular
input.

Stage One

 is the period of most growth in a company's production. In this period, each

additional variable input will produce more products.
Stage Two

 is the period where marginal returns start to decrease. Each additional variable input
will still produce additional units but at a decreasing rate.
Stage Three

 It is the period where marginal returns start to become negative. Adding more
variable inputs becomes counterproductive; an additional source of labor will
lessen overall production.

Production and Return to Scale

 Decreasing return to scale- output increases by a smaller extent than that each
of the input used.
 Increasing return to scale- output increases more than double as inputs are
doubled.
 Constant return to scale- output expands by exactly the same extent as inputs.
ACTIVITIES
LESSON 3
COST OF PRODUCTION

 KEYWORDS/KEYCONCEPTS/SUMMARY

Total Fixed Costs

 represents a firm’s expenditures of fixed inputs.

Total Variable Costs

 expenses on raw materials and wages of workers and all variable inputs incurred
in the production.

Total Costs
 All costs incurred in production.

Average cost 
 or unit cost is equal to total cost divided by the number of goods produced (the
output quantity, Q). It is also equal to the sum of average variable costs (total
variable costs divided by Q) plus average fixed costs (total fixed costs divided by
Q).

Marginalcost 
 is the change in the total cost that arises when the quantity produced is
incremented by one unit. That is, it is the cost of producing one more unit of a
good. In general terms, marginal cost at each level of production includes any
additional costs required to produce the next unit.
ACTIVITIES
LESSON 4
THE FIRM AND PROFIT MAXIMIZATION

 KEYWORDS/KEYCONCEPTS/SUMMARY

Revenue
 refers to earnings derived by the firm out of selling the output that it produces.
Total Revenue
 refers to the income derived by the firm by selling the product it produces.TR=
PxQ.
Marginal Revenue
 refers to the extra income derive by the firm by selling additional unit of output.

Profit
 the difference between cost and revenue.

PROFIT MAXIMIZATION

Total Cost- Total Revenue Approach

 under this approach the profit maximization point is when the difference between TR and
TC is greatest.

Marginal Cost

Marginal Revenue Approach

 under this approach the rule is that, the firm will maximize profit at an output here
marginal cost is equal to its marginal revenue.
ACTIVITIES
LESSON 5
MARKETSTRUCTURE

 KEYWORDS/KEYCONCEPTS/SUMMARY

Market structure 
 is the number of firms producing identical products which are homogeneous

Monopolistic Competition
 Characteristics
 Relatively large number of firms
 Free entry and exit of firms
 Differentiated product
 Non-price competition
No collusion

 Pure Competition
 Features
 Large Number of Firms
 Homogenous goods and services
 Freedom of entry and exit
 Knowledge of Market Conditions
 Price Taker
 Pure Monopoly
 Features
 Single Firm
 Substantial Control Over Price
 Unique Product
 Entry Barriers

Oligopoly
 Features
 Few large number of firms
 Standardized or differentiated product
 Control over price
 Entry barriers
 Interdependence
ACTIVITIES
GENERAL REFLECTION