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Fundamental Economic Concepts

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Submitted By murtmusal
Words 1569
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Fundamental Economic Concepts
• • • •
• • • • •

Demand, Supply, and Equilibrium Total, Average, and Marginal Analysis Finding the Optimum Point Present Value, Discounting & Net Present Value Risk and Expected Value Probability Distributions Standard Deviation & Coefficient of Variation Normal Distributions and the Standard Unit Relationship Between Risk & Return
Slide 1

Demand Curves
PRICE/Q

$5

• A demand curve shows the greatest quantity of a good demanded at each price the consumers are willing to buy, holding other influences constant (ceteris paribus).
20
Quantity / time unit
Slide 2

Sam

+

Diane

=

Market

• The market demand curve is the horizontal SUM of the individual demand curves. • The demand function includes all variables that influence demand.

4

3

7

Q = f( P, Ps, Pc, I, N, Pe)
+ ? + +
P is price of the good PS is the price of substitute goods PC is the price of complementary goods I is income, N is population, Pe is the expected future price
Slide 3

Determinants of Demand
i.
ii. iii. Pc iv. v. vi. vii. viii. xi. x.

price, P price of substitute goods, Ps price of complementary goods, income, I advertising, A advertising by competitors, Ac size of population, N, expected future prices, Pe adjustment time period, Ta taxes or subsidies, T/S

• The list of variables that could likely affect demand varies for different industries and products. • The ones on the left tend to be significant.
Slide 4

Supply Curves
PRICE/Q

• A firm‟s supply curve is the greatest quantity of a good supplied at each price by the firm, holding other things constant.

Quantity / time unit
Slide 5

Acme Inc. + Universal Ltd. = Market • The market supply curve is the horizontal sum of the firm supply curves. • The supply function includes all variables that influence supply.

4

3

7

Q = g( P, PI,

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