| What is a Margin?
-What is a Marginal Cost? | -A Change in a Variable, due to an Increase of One Unit of Another Variable
-So Marginal Cost of Good X is the Additional Cost of making one More Good X - The Cost of the Final Good X Produced |
| Why is Marginal Changes important in Economics?
-Where is it Seen? | -Theories is based on Assumptions that Decisions people make is based on Marginal Changes: Do I work another Hour?
-Seen in: Price, Wage Differentials, Externalities, Profit Maximising in Perfect Competition & Efficiency of Mark Structures. |
| Why do Traditional Economics assume that Economic Agents [Producers, Workers and Consumers...] act Rationally? | -This can be based on the Assumption that Economic Agents want to Maximise their Utility [Well-Being]
-Different Economic Agents will have different Ways and Targets to Maximise their Utility: Consumer with Value; Producer with Profit
-This means Decisions have to be made on the Basis that it will Gain the Most Utility more: Nothing else will Influence that Decision |
| What is:
1. Marginal Utility
2. Total Utility
3. The Law of Diminishing Marginal Utility | 1. The Benefit from the Consumption of One Additional Unit of Good X
2. Overall Benefit from Consuming Good X
3. As Each Additional Unit is Consumed, the Marginal Utility goes Down. |
| Why may Producers may Maximise their Profits? | -Profits allows the Firm to Survive
-Better Profits can lead to be Better Rewards for Shareholders & Staff
-Profit to be Reinvested to hope of making More Profit Later [Growth] |
| What other Objectives can Producers focus on and Why? | -Larger Market Share: Leads to Monopoly Power, therefore charging High Prices from Lack of Competition [Profit?]
-Massive Firms: Seen to be Prestigious and Stable, getting Best Employees and Resources
-Ethical Reasoning: Doing Good, even if Profits do not Increase. |
| What will the Consumer’s Objective be? | -To Maximise their Utility, which is confined by their Income
-Utility will have Different outcomes for Different People - Some value the aspect of a Secure Pension Fund while others want Luxurious Sports Cars
-Whatever they spend on, it is said to be Rational as it increases their Utility in their own Sense |
| What do Governments try to Aim for in terms of Economics? | -Ultimately it is to Balance the Resources of the Nation to the Needs & Wants of Population - Maximise the Public Interest. These are:
Economic Growth, Full Employment, Equilibrium in Balance of Payments and Low Inflation.
-However it is important to note that solving One of these Objectives may make another Worse off - More Gov Spending to create Jobs Yay, Inflation may pick up: Nay |
