When the price of a product or service increases (for example: if the demand increases), the quantity produced usually increases. Similarly, when the demand decreases, the price decreases and the quantity produced usually decreases.
The variation in the quantity in the face of a price variation can be big or small. But how to measure if the responsiveness of the supply is big or small?
The elasticity of demand measures the relative change in the total amount of goods or services that are demanded by the market or by an individual. The quantity demanded depends on several factors. Some of the most important factors are the price of the good or service, the price of other goods and services, the income of the population or person and the preferences of the consumers.
Elasticity is a measure of the responsiveness of a variable. There are several types of elasticity. In this article, we discuss about them.
The distinction between macro and micro economics is the most usual classification of economic analysis.
A model is a representation of a theory or event. An economic model is a simplified representation of economic processes. This representation can be used to:
In economics, a production function represents the relationship between the output and the combination of factors, or inputs, used to obtain it.
Q=f(L,K)
Where:
- Q is the quantity of products
- L the quantity of labor applied to the production of Q, for example, hours of labor in a month.
- K the hours of capital applied to the production of Q, for example, hours a machine has been working for the production of Q.
There can be other inputs, K and L are just examples.
The most common division of economics is that which separates macroeconomics from microeconomics. The difference between macro and micro was introduced in 1933 by the Norwegian, Ragnar Frisch. The origin of the words says a lot about their meaning: in Greek, macro means big and micro means small.
A production function is a relationship between outputs and a combination of factors used to obtain it.
Given a technology, a production function shows us that the quantity of a product Q that is obtainable by a business, is a function of the quantities of capital (K), labor (L), land (P) and business initiative (H), so that:
Q = f(K,L,P,H)
If we consider only one input:
Economics is a social science that studies the way in which people, organizations and countries assign resources. Its objective is to study the relationships between production, distribution, exchange and consumption of goods, services and ideas.
The main objective of economics is to enhance the well being of people, but this does not necessarily mean to grant them the greatest amount of consumer goods.
Microeconomics is a branch of economics that studies the allocation of scarce resource among alternative purposes. It analyses the behavior of individual agents; as opposed to macroeconomics, that studies the behavior of economic aggregates. Microeconomics focuses on individuals, families and companies.