Economics definitions and graphs the best gp

Economics definitions and graphs the bes

1. Managerial Economics Definitions & Graphs Professor & Lawyer. Puttu Guru Prasad (ICFAI Trained & Certified Management Faculty ) DIDACTICAL Significance:- M.Com----------------------------- (Madras University) M.B.A ------------(Dr. Ambedkar University, First Class) TOEFL------------------- (Top Scorer, Qualified for I-20) GMAT---------------- (Qualified for I-20 US Study Visa) L.L .B ------- (Gold Medalist, Acharya Nagarjuna University) PGDM ----------------------- (Foreign Trade Management) M.Phil- ----- ( Annamalai University, Distinction Holder) F.T.P ----- (ICFAI, 30 th Batch Topper and Domain Topper) APSET----------------------- (Qualified with 68% marks) P.h.D ---------------- (Pursuing from JNJTUK, Kakinada)

2. Fixed Costs Fixed costs are costs of production that do not change based on output. They remain constant despite the number of products produced. e .g. Building cost, Land

3. Fixed Cost Graph Cost Quantity F c

4. Variable Costs Variable costs are costs of production that change based on output. They differentiate as the number of products produced changes. e .g. Labor, Materials, Production

5. Variable Cost Graph Cost Quantity F c V c

6. Laws of Return The l aws of return dictate how much return is created based on output. The laws of return can be observed along the variable cost curve.

7. Law of Increasing Return The law of increasing return states that for the first few factors of variable cost added, the increase in output will be greater than the increase in cost. V c Cost Quantity Increasing Return

8. Law of Constant Return The law of constant return states that for the following factors of variable cost added, the increase in output will be equal to the increase in cost. Quantity Constant Return V c Cost

9. Law of Diminishing Return The law of diminishing return states that for the final factors of variable cost added, the increase in output will be less than the increase in cost. Quantity Diminishing Return V c Cost

10. Total Cost The Total Cost is the combination of all factors of cost, namely variable and fixed costs. Represented as an equation, total cost is equal to the sum of the variable and fixed cost.

11. Total Cost Graph Cost Quantity F c V c T c

12. Total Revenue The Total Revenue is the revenue generated from the sale of any number of products. As an equation, it is represented as price multiplied by the quantity sold.

13. Average Revenue The Average Revenue is the revenue received as an average for each product sold. That is, it is the total revenue divided by the quantity produced. On a graph, average revenue is assumed to be equal to the demand for a product

14. Average Revenue Graph Cost Quantity A r = D

15. Marginal Revenue The Marginal Revenue is the revenue gained by selling an additional unit of a good or service. Graphically, is it generally assumed to be equivalent to half of the A r value, though this relationship is not always true.

16. Marginal Revenue Graph Cost Quantity A r = D M r

17. Average Cost The Average Cost is the average cost of production per unit. Represented as an equation, the average cost is the total cost divided by the quantity produced. Graphically the average cost is usually curved, representing the idea of diminishing return.

18. Average Cost Graph Cost Quantity A r = D M r A c

19. Marginal Cost The Marginal Cost is the additional cost of producing an additional unit of output. As an equation, it can be represented as half of the average cost, though more often than not it deviates from this qualification.

20. Marginal Cost Graph Cost Quantity A r = D M r A c M c

21. Normal Profit Normal Profit is when the revenue generated is equal to the cost of production. Graphically, this means that Q 1 falls at a point on which A r and A c overlap, or are equal .

22. Normal Profit Graph Cost Quantity A r = D M r A c M c Q 1 P 1

23. Abnormal Profit Abnormal Profit is when the revenue generated is greater than the cost of production. Graphically, this means that Q 1 falls at a point on which A r is above, or greater than A c . The area above the A c point to the A r intercept is equal to the profit generated by sales.

24. Normal Profit Graph Cost Quantity A r = D M r A c M c Q 1 P 1 Profit

25. Short Run Average Cost (SRAC) The Short Run Average Cost in the average cost as it changes based around changes in increase (or decrease) in production from a change in factors of production.

26. Short Run Average Cost SRAC 5 SRAC 2 SRAC 3 SRAC 4 SRAC 1

27. Long Run Average Cost (LRAC) The Long Run Average Cost in the average cost as all factors of production become variable, or subjected to change.

28. Long Run Average Cost SRAC 5 SRAC 2 SRAC 3 SRAC 4 SRAC 1 L RAC 1

29. Economies of Scale Economies of Scale are any fall in long-run unit (average) cost that comes as the result of a firms change in production scale. Economies of scale can be shown on a short and long run graph.

30. Economies of Scale SRAC 5 SRAC 2 SRAC 3 SRAC 4 SRAC 1 L RAC 1 Economies of Scale

31. Diseconomies of Scale Diseconomies of Scale are any an increase in long-run unit (average) cost that comes as the result of a firms change in production scale. Economies of scale can be shown on a short and long run graph.

32. Diseconomies of Scale SRAC 5 SRAC 2 SRAC 3 SRAC 4 SRAC 1 L RAC 1 Dise conomies of Scale Economies of Scale