Notesale: Turn your study into money

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Perfect competition:
It is a market structure
characterized by a complete absence of
rivalry among the individual firms
...
Large number of buyers and sellers
...
Product homogeneity
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Perfect knowledge
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Free entry and exit of the firm
...
Profit maximization
...
No government regulations
...
Perfect mobility of factors of production
...
These two costs are :
1st
...
Variable cost

Fixed cost :
The cost which is paid in any case like
whether you are producing or not ,also it is
the constant amount of rent no matter what
the production of good is
...

Amount of

Fc + Vc

=

Tc

good

1
2

20,000+30,000 = 50,000
20,000+60,000 = 80,000

Average total cost :
Averagetotal cost is equal to total cost divided
by quantity of goods produced, also it is
equal to the sum of average fixed cost and
average variable cost
...
It can be obtained
by multiplying the quantity of goods and
services by the price obtained by selling
them
...
Q)
= P
...


Supernormal/Abnormal profit:
Economists tell us that a profit can be
maximized by producing at that level where

MC

the marginal cost is equal to marginal
revenue
...
Simply
put, normal profit is the minimum level

of profit needed for a company to
remain competitive in the market
...

MC

AVC

E
P

MR

Q
TC = OQEP

LOSS = PEE1 P1
TR = OQP1E1

Gross domestic product:

GDP is the total market value of all goods
and services produced within the political
boundaries of an economy during a given
period of time, usually one year
...
Total expenditures on domestically
produced final goods and services
...
Total income earned by domestically
located factor of production
...

On the other hand firm is giving goods to
the household and in return household is
giving money in the form of expenditures
...
Nominal value changes due to
shifts in quantity and price
...
Used goods are not included in the
calculation of GDP
...
Treatment of inventories depends
on if the goods are stored or if they
spoil
...
Intermediate goods are not counted
in the GDP only the final product is
included in GDP
...
A firm may make and then
use intermediate goods, or make and
then sell, or buy then use them
...
So
, cotton, thread and cloth are
intermediate goods
...
It can change over time either

because there is a change in the
amount of goods and services or in the
prices of goods and services
...

Real GDP is the value of goods and
services measured using a constant set
of prices
...


GDP = Nominal GDP * 100

Components of
expenditures:
Y = C + I + G + NX
Y => total demand for domestic
...

I => investment spending by businesses
and households
...

NX => net exports or net foreign
demand
...
Durable goods:

Those goods which last for a long
term i
...
cars, home appliances
etc
...
Non – Durable goods:
Which does not last longer i
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air
travel, dry cleaning etc
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i
...

ii
...

iii
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Investment vs capital:
Capital is the
one factor of production
...

Government spending:
G includes all
government spending on goods and
services
...

Net exports:
The value of total exports minus the
value of total imports equals to net
exports
...
Gross national product is also
the federal government’s official
measure of how much output our
economy produces
...


Other measures of income:
i
...

NNP = GNP – depreciation
ii
...
Disposable personal income:
DPI = PI - tax
Consumer price index:
CPI is a measure
of the overall level of prices
...
It is used to track changes in
tytypical households etc

typical household’s cost of living etc
...
This
relationship can be made clear by this:
% change in real GDP = 3% 2*(change in the unemployment rate)
OKUN’s law states that one percent
decrease in unemployment is
associated with the two percent points
of additional growth in real GDP
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MPC = ∆C/∆Y
Where “Y” is the income
...

MPC + MPS = 1

Investment curve:
Here “r”
represents investment rate while “I”
represents investment, showing that
they have negative relation in between
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C = Currency
2nd
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M2 = M1 + small time deposits+ saving
deposits+ money market mutual funds+
money market deposits account
4th
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Money:
Economists, however, have a
language all their own when it comes
to money
...
Money is a medium of exchange
in the sense that we all agree to accept
it in making transactions
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Inflation is like
a tax on people to hold money
...
The
government can print money, the
revenue raised from printing money is
called seigniorage
...

r=i–π
where “r” is real interest rate “i” is
nominal interest rate and “π” is inflation

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