MANAGERIAL ECONOMICS- REVIEWER

TRUE OR FALSE
1. Stagnation helps managers recognize how economic forces affect organizations and describes
the economic consequences of managerial behavior
2. Okoynimiya is the Greek Word for Economics
3. Adam Smith is the Father of Economics
4. Economics deals with how to satisfy the limited wants and needs of humans with the unlimited
resources we have
5. Aristotle is the Father of Economics
6. The Two Branches of Economics are Managers and Stockholders
7. Scarcity means that resources are limited for the unlimited wants of man
8. Macroeconomics is an aggregate view of the economy
9. Management are guidance, leadership and control of the efforts of a group of people towards
some common objective
10. The price elasticity of demand is the total change in the quantity demanded of a good or service
divided by the percentage change in the price.
11. The formula for Price Elasticity of Demand is Percentage Change in Quantity Demanded is equal
to Percentage Change in Price divided to Price Elasticity of Demand.
12. Exogenous Variables are the factors outside the control of the firm.
13. Consumer Basket is a combination of goods and services.
14. Cardinal Total Utility and Ordinal Marginal Utility are the two-measuring utility.
15. Budget Line is also known as Budget Constraint.
16. Innovation is the key when your product reaches the highest satiety.
17. Utility is tangible.
18. Sellers always prefer more to less of any good or service.
19. Marginal formula is change in marginal utility divided by change in number of prices.
20. The Law of Diminishing marginal utility states that as an individual increases consumption of a
given product within a set period of time, the marginal utility gained from consumption
eventually declines.
21. Perfect substitutes are goods and services that satisfy the same need or desire.
22. When we graph Perfect Substitute, it shows a parallel curve.
23. Perfect complements are goods and services consumed together in the same combination.
24. When we graph Perfect complements, it shows a vertical line.
25. When we graph Imperfect Substitutes, it shows a L line.
26. Equation for Budget line is Total Budget = Spending on Goods + Spending on Demand.
27. A plot of the relationship between income and the quantity consumed of a good or service is
called an Ernst Engle.
28. Market is the place where buyers and sellers meet.
29. Demand is the quantity of goods or services buyers are willing and able to buy.
30. Major factor affecting demand and supply is Income.
31. Law of Demand as Price increases, quantity demands will decrease ceteris paribus.
32. Supply is the quantity of Goods or services consumers are willing and able to sell at different
prices.
33. Law of Supply as price decreases, quantity supplied will also increase ceteris paribus.
34. Market Equilibrium is where quantity demanded is equal to the quantity supplied.
MANAGERIAL ECONOMICS- REVIEWER

35. Utility Theory is the ability of goods and services to satisfy consumer wants as the basis for
consumer demand.
36. Market Basket is the bundle of items desired by the consumers that reflect the combinations of
goods and services available in the marketplace.
37. Marginal Utility measures the added revenue derived from a 1-unit increase in consumption of a
particular good or service, holding consumption of other goods and services constant.
38. Indifference curves represent all market baskets that provide a given consumer the same
amount of utility or satisfaction.
39. Imperfect substitutes are goods and services that satisfy the same need or desire.
40. Perfect substitutes are goods and services consumed together in the same combination.
41. Perfectly Inelastic Demand coefficient is Zero.
42. Perfectly Elastic Demand coefficient is infinity or math error.
43. Unitary Elastic Demand coefficient is equal to 1.
44. Total Revenue minus Explicit Cost is equal to Economic Profit.
45. Total Revenue minus (Implicit Cots + Explicit Cost) is equal to Accounting Profit.
46. Fixed Costs are expenses that do not vary with the level of output or sales volume of a business.
47. Variable Costs are expenses that change in proportion to the level of output or sales volume of a
business.
48. The value of something is what you give up to get it is called Revenue. –
49. Price Elasticity of Demand formula is PED = %▲Quantity Demanded divided by %▲Price.
50. Endogenous variables are factors within the control of the firm.

FORMULA’S:

1. PRICE ELASTICITY OF DEMAND – PERCENTAGE CHANGE IN QUANTIY DEMANDED DIVIDED BY

PERCENTAGE CHANGE IN PRICE

Where in:

To get the Percentage Change in Quantity demanded

Qd2 – Qd1
(Qd2 + Qd1)
2

Where Q1 = Original quantity demanded

Q2 = New quantity demanded

While to get the Percentage Change in Price

P2 – P1
(P2 + P1)
2
MANAGERIAL ECONOMICS- REVIEWER

Where P1 = Original Price

P2 = New Price

2. TOTAL COST – VARIABLE COST-PLUS FIXED COST

3. MARGINAL COST FORMULA – CHANGE IN TOTAL COST DIVIDED BY CHANGE IN QUANTITY (to
get change in total cost, you need to subtract the current total cost in the previous total cost
while change in quantity you need to subtract the current quantity or output in the previous
quantity or output).

4. AVERAGE VARIABLE COST – VARIABLE COST DIVIDED BY QUANTITY OR OUTPUT.

5. AVERAGE FIXED COST – FIXED COST DIVIDED BY QUANTITY OR OUTPUT

6. AVERAGE TOTAL COST – TOTAL COST DIVIDED BY QUANTITY OR OUTPUT.