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Portfolio
Takahiro Kono
Definitions
• Cost Theory: the theory that the price of an object or condition is determined by the sum of the cost of the resources that went into making it
• Revenue Theory: the change in total revenue earned by a firm that results from employing one more unit of labor
• Profit Theory: The positive gain from an investment or business operation after subtracting from all expenses
• Marginal Cost: Increase in total cost of producing an extr unit of output
• Total Costs: Total cost to produce a certain output TC=TFC+TVC
• Total Variable Cost: Total cost of the variable assets that a firm uses in a given period of time
• Total Fixed Costs: Total cost of fixed assets used in a given time period
• Price Discrimination: When firms actively adjust prices according to the willingness/ ability of different consumers to pay
• Macroeconomics: The Study of a national economy• GDP: Gross Domestic Product= Total value of all
spending in an economy
• GNP: Gross National Product= Total income earned by a nation’s factors of production regardless of where the assets are located
• Real GDP: Nominal GDP adjusted for inflation• Economic Development: A multidimensional concept that
includes poverty reduction, provision of education, health care and law and order, civil liberties and civic participation
• Aggregate Demand: The aggregate (total) spending on goods and service in a period of time at a given price level
• Aggregate Supply: The amount of goods and services that all industries will produce at a given price level
• Fluctuations in the growth of real output, consisting of periods of expansion and contraction called business cycles or trade cycles
• Recession: When the economy experiences two consecutive quarters of falling GDP
• Neoclassical Perspective: Price mechanism regulates markets, full employment achieved without intervention, economy is an harmonious system, perfect competitive equilibrium is the benchmark
• Keynesian Perspective: Price mechanism fails as wages are “downward sticky”, reaching full employment requires intervention, the economy is inherently unstable, the economy can get stuck in the SR
• Fiscal Policy: Increase government spending, decrease personal and/or business taxes, combination of both policies
• Monetary Policy: Increase money supply, lower interest rates (easy money)
• The Multiplier Effect: Any change in consumption, investment, government spending, and net exports. Prices induced expenditures, a chain reaction of further expenditures
• Crowding-out Effect: Governments borrow to finance fiscal policy, interest rates rise, private investment fails
• Unemployment: Number of adults who are not working but actively look for a job
• Underemployment: Number of adults who are working part-time but looking for full time work or people who are not fully using their skills
• Unemployment Rate: Number of unemployed as a percentage of the labor force
• Inflation: A continuing increase in the general price level of goods and service within the economy
• Deflation: A continuing decrease in the general price level of goods and service within the economy
• CPI (Consumer Price Index): Compares the value of a basket of goods and services in one year with a same basket in the base year
Diagrams
The Total Product Curve
Average and Marginal Product Curves
TFC, TVC, and TC
Cost Curves
LRAC
Economies and Diseconomies of Scale
Revenue Curves: Perfectly Esalstic Demand
5
Price
Output
D=AR=MR
Relationship between D, AR, MR, TR, and PED for a Normal Demand Curve
Shut Down Price
Profit Maximizing Level of Output with Perfectly Elastic Demand
Profit Maximizing Level of Output with Perfectly Elastic Demand
Profit Maximizing Level of Output with Normal Demand
Profit Maximizing Level of Output with Normal Demand
Normal Profit Normal Demand
Abnormal Profit Normal Demand
Loss Normal Demand
Profit, Sales, and Revenue Maximization
Profit, Sales, and Revenue Maximization
Price Discrimination Example Total Ticket Sales
Price Discrimination Example Adult Tickets
Price Discrimination Example Adult Tickets
Productive Efficiency: Resources are not wasted
Allocative Efficiency/ Socially Optimum Level of Output
Perfect Competition Versus Monopoly
Perfect Competition Versus Monopoly
Aggregate Demand Curve
Shifts in AD
Demand for investment funds
Aggregate Supply in the Short Run
Shifts in SRAS
Macroeconomic Equilibrium
Shifts in AD
Shifts in SRAS
Business Cycle
Using Diagrams to Illustrate Macroeconomic Goals
Using Diagrams to Illustrate Macroeconomic Goals
Changes in AD
Changes in SRAS
Deflationary (recessionary) Gap
Inflationary Gap
Full Employment Level of Output
Changes in AD
Changes in AS
Neoclassical (Free Market) LRAS
Long-run Equilibrium
Long-run equilibrium and Decline in AD
Return to Long-run equilibrium
Long-run equilibrium
Long-run equilibrium and Increase in AD
Return to Long-run equilibrium
Keynesian SR/LRAS
Inflationary Gap in the Keynesian Perspective
Full Employment Equilibrium in the Keynesian Perspective
Economic Growth: Neoclasical Perspective
Economic Growth: Keynesian Perspective
The Multiplier Effect
Crowding-out Effect
Crowding-out Effect
Demand-pull Inflation
Cost-push Inflation
“Good” Deflation
Phillips Curve
Phillips Curve