★Variable cost: expenses that change with the output change,(raw materials), begins at

zero when Q is zero (0), part of TC, grows with output

★marginal cost:cost to Produce 1 additional unit (MC), MC = TC2-TC1= ♠TC
★Average Cost: AC= TC/q, Average Fixed cost : AFC= FC/q, Average variable cost:
AVC= VC/q
★Monopoly: one seller dictate market price (Microsoft)
★oligopoly: a few sellers dictate market (airline industry), if one increases there will
be price war & will bring down others' price. Barriers in entry.
★Monopolistic competition : kind of imperfect competition, though similar to perfect
competition, products differentiated & not identical like perfect competition, not
perfect substitutes, many sellers, non larger in market.Between pure monopoly & pure
competition short run price, output and profit is under monopolistic competition
(retail gasoline market), price doesn’t differ more than some penney. Industry
concentration ratio low, barrier low, low PED (price elasticity of demands), prices
above MC, equilibrium not efficient, non- price competition
★Cross-price elasticity measures how the demand of a product change over a change of
a corresponding product price (%∆Q of good 1)/ (%∆P of good 2)
★Managerial Implication of Indifference Curve: As the indifference curve shows the
combination of two goods of equal satisfaction,Managers can use it to determine the
quality of a product bundle and foreshadow the position of the product bundle before
finally releasing it.
★properties of indifference curve: (1) Slopes downward, (2) Convex to origin , (3) A
Higher IC curve gives higher satisfaction ,(4) IC curves can never intersect each other
(5) Asymptotic
★Managerial Implication of Diminishing Marginal Utility: Managers can take action
based on this topic. For example, a manager at a manufacturing company can take
aggregated data to check the productivity of workers, product output per hour, the
total productivity of increase for each additional worker, and their marginal utility gain.
Afterward, managers can decide whether the additional worker is profitable or not. This
can also be used in merchandising inventory, supply chain, and FMCG industries to
maximize profit function.
The law of diminishing marginal utility says that the marginal utility from each
additional unit declines as consumption increases.
Assumptions of Diminishing Marginal Utility
1) Rational Consumer ,2) Consumption to be continuous, 3) Suitable size and reasonable
size , 4) No change in Fashion, 5)No change in Price
★Managerial Implication of Engel Curve: Engel curve can be used by managers to draw
conclusions about a society’s expenditure habits. This will allow managers to
introduce new products that the consumers want and can afford. it would allow
managers to maximize their profit for the company.
★Properties of Engel curve : (1)For normal goods, the Engel curve has a positive
gradient. That is, as income increases, the quantity demanded increases.Amongst
normal goods, there are two possibilities. Although the Engel curve remains upward
sloping in both cases, it bends toward the X-axis for necessities and towards the Y-
axis for luxury goods.
(2) For inferior goods, the Engel curve has a negative gradient. That means that as the
consumer has more income, they will buy less of the inferior good because they are
able to purchase better product
Finding PED
★arc method: Arc= change in quantity demanded /average price
(∆Q/∆P) x (avg P/avg Q) = PED ( Arc)
★Percentage method= %change is quantity demanded / % change in price
★Point method: if AD is a line and B is a point on it, PED= AD/BD
★Total outley method: Expenditure /price
Price elasticity of demands: change of quantity demanded for change in price
Free market economy:
giffen good: Giffen good is a low income, non-luxury product that defies standard
economic and consumer demand theory. Demand for Giffen goods rises when the
price rises and falls when the price falls.
Hickisian = Substitution effect (substitute পাচ্ছি, দাম কমে গেছে তাই বেশি কিনব)
Marshallian = Income effect (income beshi tai বেশি কিনব)
Slutsky = price effect, compensated demand curve, not real
PE = Sub + Inc.(both hickisian & Marshallian
AVC meet can't, shutdown point, AVC & MR curve, MC = AVC > Shut down point, MC
= AC > Zero profit point, TC = TR > breakeven point, MR = MC > profit maximisation
point
MR>MC, each unit Produced bring profit, company will keep producing.
MR=MC, BEP, max profit
MR<MC, each unit produced will cause money loss
MR–MC>0 = incremental profit, MR–MC<0 = incremental loss, see incremental effect
MR represent incremental up side, MC represent incremental down side
A perfectly competitive market has several important characteristics:
(1) All producers contribute insignificantly to the market. Their own production levels do
not change the supply curve.
(2) All producers are price takers. They cannot influence the market. If a firm tries to
raise its price consumers would buy from a competitor with a lower price instead.
(3) Products are homogeneous. The characteristics of a good or service do not vary
between suppliers.
(4) Producers enter and exit the market freely.
(5) Both buyers and sellers have perfect information about the price, utility, quality, and
production methods of products.
Economics: Economics is the study of how societies use scarce resources to produce
valuable goods and services and distribute them among different individuals.
Economics scarce resources allocation.
★Microeconomics helps the decision makers to analyze and determine how the productive
resources are allocated for various goods and services. It also helps in solving the
producers' dilemma of what to produce, how much to produce and for whom to produce.
choke price is the price that no one is willing to pay for the good in question. The choke
price is the exact point at which demand ceases, making it an economically significant data
point for understanding the dynamics of demand for that product
microeconomics stock market influenced by demand supply
Stock Market Efficiency Theory: the price you see on an asset today is its true value,
reflecting any data that could drive its price up or down
production possibility frontier (PPF) is a curve illustrating the varying amounts of two
products that can be produced when both depend on the same finite resources. The PPF
demonstrates that the production of one commodity may increase only if the
production of the other commodity decreases
price determination methods : Law of diminishing returns
Collusive oligopoly is a market situation wherein the firms cooperate with each other in
determining price or output or both.
non-collusive oligopoly refers to a market situation where the firms compete with each
other rather than cooperating
Supply refers to the amount of goods that are available.
Demand refers to how many people want those goods.
The Law of Diminishing Returns
The law of diminishing marginal returns states that adding an additional factor of
production results in smaller increases in output.
Returns to Scale: output change for factors of input change
Short Run- We can change factors such as the labour or materials but can not change
the fixed factors in the short time
Long run- We change labor and capital and all factors , in same proportion
1. Increasing Returns to scale.
Increasing returns to scale or diminishing cost refers to a situation when all factors of
production are increased, output increases at a higher rate. It means if all inputs are
doubled, output will also increase at the faster rate than double. Hence, it is said to be
increasing returns to scale.
2. Constant Returns to Scale
Constant returns to scale or constant cost refers to the production situation in which
output increases exactly in the same proportion in which factors of production are
increased. In simple terms, if factors of production are doubled output will also be
doubled.
The budget constraint or budget line shows maximum a consumer is willing to spend
on a bundle of goods.
It is tangent to the consumer's indifference curve and the point of contact between IC
curve and budget line is the optimum combination for the bundle of commodity for the
consumer.
Normative economics: Opinion based economics
Mixed economy : Command economy + free market economy
Relatively elastic demand when the proportionate change in the demand is greater
than the proportionate change in the price of the good.