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PERFECT COMPETITION, PROFIT MAXIMIZATION: A perfectly competitive firm is presumed to produce the quantity of output that maximizes economic profit--the difference between total revenue and total cost. This production decision can be analyzed directly with economic profit, by identifying the greatest difference between total revenue and total cost, or by the equality between marginal revenue and marginal cost.
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Lesson 12: Elasticity and Demand | Unit 2: The Continuum
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Page: 7 of 25
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- A graphical look at three alternatives:
- Perfectly Elastic: Perfectly elastic demand results when infinitesimally small changes in price lead to infinitely large changes in quantity.
- Perfectly Inelastic: Perfectly inelastic demand results the quantity demanded does not change regardless of any change in price.
- Unit Elastic: Unit elastic demand results when the perfect change in quantity is EXACTLY the same as the percentage change in price.
- The most noted feature of this demand curve is that it is a curve and not a straight line -- the slope changes along the curve.
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LAW OF DIMINISHING MARGINAL RETURNS A principle of short-run production stating that as a firm combines more of a variable input with a fixed input, the marginal product of the variable input eventually declines. This is THE economic principle underlying the analysis of short-run production for a firm. It offers an explanation for the law of supply and the positive slope of the market supply curve.
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BROWN PRAGMATOX
[What's This?]
Today, you are likely to spend a great deal of time at a going out of business sale looking to buy either a large, stuffed giraffe or a birthday greeting card for your aunt. Be on the lookout for strangers with large satchels of used undergarments.
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Cyrus McCormick not only invented the reaper for harvesting grain, he also invented the installment payment for selling his reaper.
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"We succeed in enterprises (that) demand the positive qualities we possess, but we excel in those (that) can also make use of our defects." -- Alexis de Tocqueville, Statesman
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NAG
Net Annual Gain
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