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Economics:

  • Economic profit- The difference between total revenue and total opportunity cost.


  • Opportunity cost- The cost of the explicit and implicit resources that are forgone when a decision is made.


  • Present value- The amount that would have to be invested today at the prevailing interest rate to generate the given future value.


  • Managerial economics- The study of how to direct scarce resources in a way that most efficiently achieves a managerial goal.


  • Net present value- The present value of the income stream generated by a project minus the current cost of the project.


  • Marginal benefit- The change in total benefits arising from a change in the managerial control variable Q.


  • Marginal cost- The change in total costs arising from a change in the managerial control variable Q.


  • Incremental revenues- The additional revenues that stem from a yes-or-no decision.


  • Incremental costs- The additional costs that stem from a yes-or-no decision.


  • Market demand curve- A curve indicating the total quantity of a good all consumers are willing and able to purchase at each possible price, holding the prices of related goods, income, advertising, and other variables constant.


  • Change in quantity demanded- Changes in the price of a good lead to a change in the quantity demanded of that good. This corresponds to a movement along the given demand curve.


  • Change in demand- Changes in variables other than the price of a good, such as income or the price of another good, lead to a change in demand. This corresponds to a shift of the entire demand curve.


  • Normal good- A good for which an increase (decrease) in income leads to an increase (decrease) in the demand for that good.


  • Inferior good- A good for which an increase (decrease) in income leads to a decrease (increase) in the demand for that good.


  • Substitutes- Goods for which an increase (decrease) in the price of one good leads to an increase (decrease) in the demand for the other good.


  • Complements- Goods for which an increase (decrease) in the price of one good leads to a decrease (increase) in the demand for the other good.


  • Demand function- A function that describes how much of a good will be purchased at alternative prices of that good and related goods, alternative income levels, and alternative values of other variables affecting demand.


  • Economics- The science of making decisions in the presence of scarce resources.


  • Manager- A person who directs resources to achieve a stated goal.


Economic Analysis