Economics Concepts

Cost :- Money incurred for production

1. Fixed Cost
2. Variable Cost

Price :- Money generated for one unit of selling

Revenue :- Money received for selling goods

R=P*Q
 A few more terminologies.
Total Revenue / Cost

Average Revenue / Cost

Marginal Revenue / Cost

 Basic Market Structure
1. Perfect Competition (Many buyers and many sellers for eg.
Majority of the business today)

2. Monopoly (Only one Seller for eg. Indian Railway)

3. Oligopoly (A few Sellers for eg. OPEC countries)

4. Monopolistic Competition (Many sellers with product

differentiation)
 Perfect Competition
Features of Perfect Competition
1. Many buyers and many sellers
2. No product differentiation
3. Buyers and sellers are price taker
4. Free Entry and Exit
 An Example.
Quanti Price Total Average Marginal Total Marginal Profit Change
ty (Q) (P) Revenue Revenue Revenue Cost Cost in profit
(TR = (AR = ( MR = (TC) (MC =
P*Q) TR/Q) DTR/DQ) DTC/DQ)

0 6 0 0 - 3 - -3 -

1 6 6 6 6 5 2 1 4

2 6 12 6 6 8 3 4 3

3 6 18 6 6 12 4 6 2

4 6 24 6 6 17 5 7 1

5 6 30 6 6 23 6 7 0

6 6 36 6 6 30 7 6 -1

7 6 42 6 6 38 8 4 -2

8 6 48 6 6 47 9 1 -3