Glossary
11 July 2019
14:21
Short Run
The time when at least 1 one factor of production is fixed.
Long Run
The time when all factors of production vary.
Variable Factor of A factor that changes according to production rate
Production
Fixed Factor of
Production
A factor that remains constant irrespective of production rate
Explicit Cost
Costs that can easily be accounted for. E.g. Cost of Raw Material, Cost of
Electricity etc.
Implicit Cost
Costs that cannot easily be accounted for. E.g. Opportunity costs
Equilibrium
a state of rest, self-perpetuating in the absence of any outside disturbance
Price Mechanism
the forces of supply and demand
Allocative
Efficiency
When a market is in equilibrium, with no external influences and no external
effects, it is said to be socially efficient or in a state of allocative efficiency.
Productive
Efficiency
A firm is said to be productively efficient if it produces its product at the lowest
possible unit cost
Economics Page 1
Supply and Demand
24 May 2019
11:02
Law Of Demand
Law of Supply
Economics Page 2
Subsidies
23 May 2019
11:16
Are Subsidies effective in meeting their aims
• Will they achieve the desired stimulus to demand/consumption?
• Is the subsidy sufficient? Might other incentives be needed?
Will a subsidy affect production/efficiency
• Subsidies for Research and Investment can bring positive spill overs
• Firms may become dependent state aid/financial assistance
How much does the subsidy cost
• Is the subsidy part self-financing? Will it create more tax revenue?
• Does a subsidy create an expensive extra burden for taxpayers?
Does the subsidy help correct Market Failure
• Does the subsidy lead to undesired or unintended consequences
Economics Page 3
Price Controls
01 July 2019
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14:16
Price Controls are always reactionary and never precautionary
Price Ceiling is always below the equilibrium price.
Price Floor is always above the equilibrium price.
Price Ceilings often lead to the creation of a black market
Price Floors often lead to exploitation
Subsidies can help stabilise the forces of supply and demand
Economics Page 4
Theory of Output
11 July 2019
14:21
Productivity in the short run
Marginal Productivity =
Average Productivity of Labour =
Economics Page 5
Theory of Cost
15 July 2019
14:13
A firm's costs in the short run are both
variable and fixed.
Fixed Costs :
Rent
Interest
Normal Profit
Variable Costs Wages
Raw Material
Economics Page 6
Errors
08 August 2019
14:17
→ Incomplete Definitions
→ Mention Commodities in Data Response
→ Mention multiple reasons for any change
→ Change in Price of Raw Material will affect Supply of Finished Good
Cycle test
→ 45 mins for 25 marker
→ 45 mins for Data Response
Economics Page 7
Monopoly
13 August 2019
14:07
A single, large seller
No close substitutes
Significant entry barriers such as economies of scale, branding and legal barriers
Economics Page 8
Monopolistic Competition
27 August 2019
14:05
Monopolistic Competition:
• Low (non-zero) Entry and Exit barriers
• Differentiated Products
○ Branding
○ R&D
○ Location
• Inefficient (Both allocatively and productively) in the long run
Super Normal Profits in a Monopolistic Competition
Market Structure
Economics Page 9