Microeconomics |
Determining the Shutdown Point of a Firm This continues a previous post on profit maximization. The question we want to continue with is when should a firm shutdown? Then answer is when P (price) = AVC (average variable cost). This is the output where firms are...
Microeconomics |
Here is a list of some of basic microeconomics formulas pertaining to revenues and costs of a firm. Remember when you’re using these formulas there are a variety of assumptions, namely, that the the firm is profit-maximizing (making as much money as they can.)...
Microeconomics |
Before we talk about choices, preferences, trade-offs and indifference curves, we should briefly look over some key terms. We assume people are rational decisions makers and that there is almost nothing someone is unwilling to trade for correct compensation....
Banking |
Do Banks Create New Money out of Thin Air? **Re-posted after the events of the credit crunch and 700 bailout packages, enjoy the read and learn how the banks got themselves in this mess.** Here’s the story. Banks keep on lending money, but where do they get it...
Microeconomics |
The shapes of indifference curves are smooth with unique tangent at any bundle we have well define marginal rate of substitution (MRS). MRS is undefined if m (slope) = kinked. 1. Strictly convex: Using the example of any 2 bundles on (A & B) the indifference...
Investments |
Canadians are expected to contribute a record $38.6 billion towards their RRSPs in 2014 but this number is minuscule compared to the $951 billion in unused RRSP contribution room. The number of contributors from 2013 to 2014 was in fact up 3.2% Fewer than 40 per cent...
Microeconomics |
Welcome to the next section following a discussion on utility and indifference curves (preferences of consumers). We are now into a discussion on demand theory; the previous posts are linked chronologically at the bottom of this post. Demand theory wants to explore...
Microeconomics |
In the past installments from DiscussEconomics on demand theory, now we’re venturing into the graphical and mathematical expressions of the Cobb Douglas demand function. Graphically expressed (utility maximizing) with the assumption well-behaved preferences. The...
Microeconomics |
Normal, Inferior, Neutral, Luxury, Necessary Goods There are three fundamental questions about a consumer’s consumption response: 1. How will demand change for a good i change in response to a increase or decrease in the price of i? 2. How will demand for good i...
Macroeconomics |
Economics: The Study of how society deals with scarcity. Here is a brief article on the introductory components of any economy with a macroeconomic slant. In the economy we expect to find these four components: resource endowment, technology, preference, institutions....
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