Microeconomics

Summary of “Economic Profit vs. Accounting Profit” Robert L. Bartley writes about the about how the economic and accounting versions of profit differ. While economists are interested in what creates production and thus profit, while accountants focus on the money earned for the owner. Most CEO and CFOs are follow the accountants definition, however they should be looking at the economists way, as it show the driving force behind the company’s production rate and profit. Summary of “America’s…

1. When we considering changing the price of a product, we should underscore not just the basic logic of price and quantity but also the factors which leads the producers to think about change. For some goods a small price change results in a big change in quantity demanded; for other goods, a big price change results in a small change in quantity demanded. If we consider the injections have an inelastic demand, according to demand theory; we can say that the percentage change in quantity is…

Explain the impact the law of diminishing marginal returns has on both marginal cost and average total cost MARGINAL COST Marginal cost is a total cost to the company to produce one more product. This cost changes depending on how many products the company aims to produce. Changes in production may increase or decrease the marginal cost due to the marginal cost including all costs such as materials, labour, infrastructure. Marginal cost diagram has a U-shaped curve as a result of increasing…

1.5 stratification (15 points) (1) Weber’s conception of stratification is derived from his analysis of economic activities in relationships. He said that economic relationships are decided by individuals’ chance of using their material property for exchange on the market. Thus, people sharing similar material conditions are classified into groups. In Weber’s view, the inequality between different groups is associated with not only the economic dimension but also social, political, and…

The classical competitive equilibrium theory assumes that there is centralized market where buyers and sellers of labor can meet and trade at a single price. In reality the supply-and-demand approach seems poorly suited for some questions that arise in the labor market. Particularly questions such as why identical workers in an identical job position are paid differently? How are wages determined? Is there bargaining between firms and workers? Equilibrium search theory provides a rigorous but…

The neoclassical economic model gives an exceptionally fulfilling clarification of why parties are willing to join hands and enter into a contracts. Parties enter into contracts with their own free will without any coercion. Hence each party will enter into a contract only if its anticipated benefits are greater than the expected costs. For example assume that a house owner offers to pay a painter $5,000 to paint her home. The house owner must expect the value of the benefits she receives from…

A monopoly is a market where the supply of a commodity is controlled by one firm who then becomes the single seller. Monopolies hold power over the market, meaning they can either set a fixed price or determine an output and then sell this output at the highest price the market will bear. The United States Postal Service is a natural monopoly, meaning they have large economies of scale that limit their costs of production and are large enough to efficiently supply the country with mail. Since…

Economies of scale refer to economic efficiencies as an outcome of conducting a process on a mass scale. Scale effects come to picture due to the presence of fixed and variable costs in the production process. In other words, ‘Economies of Scale’ or ‘Increasing Returns to Scale’, is a term used by economists to refer to the situation in which the cost of producing an additional unit of output (i.e., the marginal cost) of a product (i.e. a good or service) declines as the quantum of output (i.e.,…

Elasticity is used in economics to measure the degree of responsiveness in demand in relation to an alteration in price or income. Economists use the term price elasticity of demand to express how much a change in price influences demand. Comparable, cross price elasticity determines the change in demand of one product with the increase or decrease in price on a different product. Similarly, income elasticity of demand intends to measure the change in demand after a change in consumers’ income.…

The definition of Relational Dialectics Theory describes how relational life is described as an ongoing tension between contradictory impulses (199). However, the theory can benefit from economic terms as presented in Social Exchange Theory. Moreover, the theory could develop and explain how cost and rewards affect a relationship based on ongoing tensions. The two theories have similarities staring with their assumptions of rational life. Consequently, Relational Dialectics can use an…