Week 2 Economics Essay Example | Topics and Well Written Essays - 750 words

Week 2 Economics - Essay ExampleIn much(prenominal) a agency, an increase in harm causes the tax earned by suppliers to go up and misdeed versa. In contrast, the price elasticity is termed elastic whenever the change in demand of a quantity is greater in comparison to a change in price. in this situation, an increase in price causes the revenue to fall and vice versa. In a perfectly elastic situation, a change in price will cause demand to fall to zero thereby bringing the corresponding revenue to zero. However, when the situation resembles a perfectly inelastic curve, a change in price has no influence on the quantity demanded and the demand curve is a vertical line, which is in clear violation of the law of demand.In a perfectly competitive market, a number of producers are producing identical goods with no product differentiation. Therefore, a producer cannot set any price as desired as doing so would put them divulge of business due to availability of substitutes.Accounting profit is price minus costs for all processes that sponsor bring a product or service to the market. Economic profit is the money earned by investor as a result of their coronations. As such, it does not have anything to do with the way firms use that investment to produce goods and generate chronicle profit. Economic profit can be negative even when accounting profit is in the green zone.Short term decision making is driven by the adjacent demand and supply forced in the market to which the firm may not be fit to make major investments or changes and may have to use present capacities to produce the maximum quantity. hanker term decisions require time to implement and must be planned in advance victorious the long term demand and supply into consideration.The combination of price and the production function gives the cost curve. The correspond cost curve is the amount spent on all fixed and variable costs epoch the