tailieunhanh - Lecture Business economics - Lecture 7: The costs of production - I

In this chapter you will examine how taxes reduce consumer and producer surplus, learn the meaning and causes of the deadweight loss of a tax, consider why some taxes have larger deadweight losses than others, examine how tax revenue and deadweight loss vary with the size of a tax. | Review of the previous lecture The consumer optimizes by choosing the point on his budget constraint that lies on the highest indifference curve. When the price of a good falls, the impact on the consumer’s choices can be broken down into an income effect and a substitution effect. The income effect is the change in consumption that arises because a lower price makes the consumer better off. The income effect is reflected by the movement from a lower to a higher indifference curve. Review of the previous lecture The substitution effect is the change in consumption that arises because a price change encourages greater consumption of the good that has become relatively cheaper. The substitution effect is reflected by a movement along an indifference curve to a point with a different slope. The theory of consumer choice can explain: Why demand curves can potentially slope upward. How wages affect labor supply. How interest rates affect household saving. Lecture 7 The Costs of Production- | Review of the previous lecture The consumer optimizes by choosing the point on his budget constraint that lies on the highest indifference curve. When the price of a good falls, the impact on the consumer’s choices can be broken down into an income effect and a substitution effect. The income effect is the change in consumption that arises because a lower price makes the consumer better off. The income effect is reflected by the movement from a lower to a higher indifference curve. Review of the previous lecture The substitution effect is the change in consumption that arises because a price change encourages greater consumption of the good that has become relatively cheaper. The substitution effect is reflected by a movement along an indifference curve to a point with a different slope. The theory of consumer choice can explain: Why demand curves can potentially slope upward. How wages affect labor supply. How interest rates affect household saving. Lecture 7 The Costs of Production- I Instructor: Abbas Course code: ECO 400 Lecture Outline What Are Costs? Costs as Opportunity Costs Production and Costs Costs A firm’s cost of production includes all the opportunity costs of making its output of goods and services. Explicit and Implicit Costs A firm’s cost of production include explicit costs and implicit costs. Explicit costs are input costs that require a direct outlay of money by the firm. Implicit costs are input costs that do not require an outlay of money by the firm. Profit is the firm’s total revenue minus its total cost. Profit = Total revenue - Total cost Economic Profit versus Accounting Profit Economists measure a firm’s economic profit as total revenue minus total cost, including both explicit and implicit costs. Accountants measure the accounting profit as the firm’s total revenue minus only the firm’s explicit costs. Costs When total revenue exceeds both explicit and implicit costs, the firm earns economic profit. Economic profit is .

• Kinh tế học
• Business economics
• Lecture Business economics
• Business applications of economics
• Open economy
• Competitive markets
• Economic Models
• Principles of economics
• Economics of agriculture
• Monopolistic competition
• Macroeconomic policy
• Supply curve
• Elasticity of demand
• Consumer choice
• Competitive firms
• Imperfect competition
• Gross domestic product
• Financial intermediaries
• Productivity growth
• Natural rate of unemployment
• Labor force
• Money supply