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What do FC, VC, TC, MC, AFC, AC mean (Western Economics) All the relationships between them
FC fixed cost
VC variable cost
TC total cost
Total cost = fixed cost + variable cost
MC marginal cost
AFC average fixed cost
Average (total) cost of AC
There are several situations of demand elasticity and supply elasticity. What is their economic significance
Price elasticity of demand:
Arc elasticity: it indicates the projection degree of the change of demand between two points of the commodity demand curve to the change of price
(1) Elastic: ed > 1 indicates that demand is sensitive to price changes
For flexible goods, reducing the price will increase the manufacturer's sales revenue. On the contrary, increasing the price will reduce the manufacturer's sales revenue, that is, the manufacturer's sales revenue changes in the opposite direction to the price of goods
(2) Lack of elasticity: ED
Elasticity of demand in microeconomics The price of point a is 3 and the demand is 20; The price of point B is 2 and the demand is 30 Excuse me, what is the change rate of demand from point a to point B? What is the rate of change in price?
In short, it can be calculated as follows:
Demand change rate: (30-20) / 20 = 50%
Price change rate: (3-2) / 3 = 33%
Price elasticity of demand: 50% / 33% = 1.5
However, there is a problem in calculating the rate of change or elasticity, that is, the calculation results of the same two points are different due to different definitions of starting point and end point. In this example, if it is from point B to point a, the elasticity is 0.67
Therefore, in general, the midpoint method is used to calculate the elasticity, that is, the change basis is subject to the median of two points:
Demand change rate: (30-20) / 25 = 40%
Price change rate: (3-2) / 2.5 = 40%
Price elasticity of demand: 40% / 40% = 1
How to demand elasticity! DQ and DP don't know what it is?
The problem is how much the price changes and how much the demand changes. DP is a small price change, and DQ is how much the demand changes
Demand elasticity e = dlnq / dlnp = DQ / DP * P / Q
Or E = DQ / Q / (DP / P)
That is, the rate of change in demand is higher than the rate of change in price
For example, the original price was 10 yuan, increased by 1 yuan, and the demand decreased by 5 units from the original 100 units
Then p = 10, DP = 1, q = 100, DQ = - 5
e = -5/100 / (1/10) = -0.5
The formula of elasticity in Microeconomics: ed = - (DQ / DP) × (P × Q) How is the value of (DQ / DP) determined?
For example, the price rises from 10 yuan to 15 yuan, and the demand drops from 500 units to 200 units
dQ/dP = (200-500)/(15-10) = -300/5 = -60.
If you can get the equation of Q with respect to P, such as q = f (P), then DQ / DP = f '(P) is the first derivative of equation f with respect to P
Microeconomics: should the price elasticity of demand be positive or negative? If DQ / DP is negative, why is there a minus sign in front of it - (DQ / DP) * (P / Q) And why use ed when calculating in the book|
The price elasticity of demand is positive!
(DQ / DP) * (P / Q) is a negative number, so a minus sign should be added
As for ED, e means elasticity, and D means demand demand!
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