Business economics

• Marginal Analysis is the process of breaking down a decision into a series of ‘yes or no’ decisions.
• Willingness to Pay is the maximum amount of resources a consumer is willing to lose to achieve a certain benefit.
• Sunk costs are costs that have been paid that cannot be recovered.
• Implicit Costs are the indirect cost of an action, includes the cost of forgoing the next best option.
• Explicit Costs are the direct cost of an action, usually involves a cash transaction or a physical transfer of resources.
• Scarcity is a problem because it limits the numbers of goods and services we produce with the limited resources available.
• A rise in price of a good or service will almost always decrease the quantity demanded of that good or service.
• Marginal Analysis is the process of considering the additional benefits and costs of an activity to make a decision.
• The law of demand assumes that all other variables that affect demand are held constant.
• The quantity demanded is the total number of units purchased at a certain price.
• A demand curve is a graphical representation of a demand schedule.
• Demand schedules and curves are used to analyze the relationship between price and quantity demanded.
• The supply curve can be used to examine how quantity supplied interacts with price and aYect producer surplus.
• The opportunity costs of an action include all implicit and explicit costs.
• When supply and demand are not in balance, economic forces will work until the balance is restored.
• Equilibrium is a state of rest or balance due to the equal action of opposing forces, in economics, these forces are supply and demand.
• As long as the price is above their costs, there is an opportunity for firms to undercut the competition.
• Deadweight Loss is a cost to society created by a market inefficiency, occurring when quantity is different from equilibrium quantity.
• Equilibrium Quantity is the quantity at which quantity demanded and quantity supplied are equal for a certain price level.
• Equilibrium Price is the price where quantity demanded is equal to quantity supplied.
• Equilibrium is the situation where quantity demanded is equal to the quantity supplied; the combination of price and quantity where there is no economic pressure from surpluses or shortages that would cause price or quantity to change.
• Consumer surplus is the difference between the minimum amount a consumer is willing to pay, and what he or she actually pays.
• Excess Supply occurs when, at the existing price, quantity supplied exceeds the quantity demanded; also called a surplus.
• Excess Demand occurs when, at the existing price, the quantity demanded exceeds the quantity supplied; also called a shortage.
• Price of Related Goods: The price of related goods can affect the demand for a good.
• Demand for complements is positively correlated with the other goods price, meaning if the price of jelly increases, we will purchase less peanut butter.
• Demand for substitutes is negatively correlated with the other goods price, meaning if the price of almond butter increases, we will purchase more peanut butter.
• Complement goods: Complement goods are goods that a consumer likes to consume with a given good, such as peanut butter and jelly.
• Substitute goods: Substitute goods are goods that a consumer could consume instead of a given good, such as peanut butter and almond butter.
• Since it is more expensive for Jamie to produce pineapples, he should produce fewer pineapples and more crabs.
• When the price of a substitute increases, our demand for hot dogs will increase.
• A demand shift changes the relationship between quantity demanded and quantity supplied at every point.
• Autarky is a state of economic independence or self-sufficiency.
• An Economic Model is a simplified framework that is designed to illustrate complex processes.
• Changes in technology can cause a uniform shift in the supply curve.
• Changes in the supply curve can be viewed as a vertical shift, where the marginal cost increases at every point of production.
• Changes in input prices, such as the cost of inputs, can affect the supply curve.
• Changes in the supply curve can also be viewed as a horizontal shift, where the quantity supplied increases at every price level.
• A change in quantity supplied refers to a movement along the supply curve, exploring different points on the same curve.
• Changes in supply can be caused by other determinants such as technology, expectations, and the number of producers.