ASSIGNMENT 2

SOURCE: RESOURCE MATERIALS NO. 2

ESSAY:

1. In RM-2-A, my understanding is that the theory of consumer behaviour is the study of how people
decide to spend their money based on their individual preferences and budget constraints. It is a branch
of microeconomics, consumer theory shows how individuals make choices subject to how much income
they have available to spend and the prices of goods and services. I also understand that Maslow's
Hierarchy of Needs Theory states that an individual can fulfill their self-actualization needs by exercising
their creativity and developing their problem solving skills. The best way for an economy to assist an
individual in fulfilling their self-actualization needs is by allowing for technological innovation. And the
Theory of Utility, there were functional relationship forms and is quantitatively defined as follows: TU =
f(Q)

MU = ∆ ( TU)

∆ (Q)

In RM-2-B , my understanding is that theory of cost profit explains that economic profits arise because
of successful innovations introduced by the entrepreneurs. It also states that the costs of a business
highly determine its supply and spendings. The modern theory of cost in Economics looks into the
concepts of cost, short-run total and average cost, long-run cost along with economy scales. I also
learned and understand the formulas. Profit = Total Revenue – Total Cost. Total revenue is the income
brought into the firm from selling its products. It is calculated by multiplying the price of the product
times the quantity of output sold: Total Revenue = Price x Quantity. The formula of fixed variable cost is
TC= TFC+TVC . Marginal Cost formula is MC = ∆ TC = ∆ TVC

∆Q ∆Q

MVC= ∆ TVC

∆Q

In RM- 3- C, my understanding in this lesson is the price of a product is determined at a point at which
the demand and supply curve intersect each other. This point is known as equilibrium point as well as
the price is known as equilibrium price. In addition, at this point, the quantity demanded and supplied is
called equilibrium quantity. International economics deals with issues arising from economic interaction
among sovereign nations; fields such as international trade, international financial flows, international
aid and technical assistance for developing countries, international migration, and exchange rate
regimes present international economic. Examples are foreign direct investment, grey market,
Hegomony and imports .