UNIT 3 - Micro
A level
Edexcel A
,Price Taker Price Maker Rev
Rev
They can only Rev Rev falls even as price
earn more by falls and Q increases -
selling more – no point
they don’t
have control
over their
MR must be at
prices 0 when
revenue is at a
maximum
Q
Q
Rev PED is elastic PED is inelastic -
Rev
TR will fall with
(Demand curve) falling prices
and increase
with increasing
prices
£
PED is infinity
Q
Has to accept £(10) as the market
price – at £ the firm sells as much or
as little as it wants – note at say £11
there will be no demand
, Revenue
Total revenue = earnings = income = turnover
Total revenue = units sold x price per unit
TR = price x quantity
Marginal revenue = the change in total revenue following a change in output
change in TR
change in Q
Average revenue = price ( PxQ / Q)
Price Takers (smaller firms) Price Makers (large firms)
- No influence over it’s prices (can’t set - One which can influence the price of its
prices) output
- If it lowers prices all other firms will - Can lower prices to increase sales or
lower theirs to meet them so they increase them
technically cant get more customers - They can do this because there is some
- If they increase prices they will get less lack of competitiveness in the market
demand as price making firms keep their
lower prices
, COSTS
- What are the costs of producing a certain level of output
- Q = f ( factors of productions) Q = f ( K , L ) Law of diminishing
marginal product
Fixed costs
- Independent of output
Specialisation
and division
Variable costs of labour
- Dependent on output As more workers are added and output
- Marginal cost falls into this category increase Marginal product will rise and then
fall again as eventually productivity falls and
marginal product decreases with each
added worker. Eventually additional workers
may destroy value rather than create it.
U shape is because of
MC
Total cost = total fixed cost + total variable cost marginal productivity
TC = TFC + TVC having an effect of ATC
marginal costs AVC
Average cost = cost per unit
Marginal cost = the change is TC following a change in output
- Knowing unit costs is useful for establishing efficiency levels AFC
- Marginal cost is useful for decision making – should and extra
unit be produced, also useful to individuals
A level
Edexcel A
,Price Taker Price Maker Rev
Rev
They can only Rev Rev falls even as price
earn more by falls and Q increases -
selling more – no point
they don’t
have control
over their
MR must be at
prices 0 when
revenue is at a
maximum
Q
Q
Rev PED is elastic PED is inelastic -
Rev
TR will fall with
(Demand curve) falling prices
and increase
with increasing
prices
£
PED is infinity
Q
Has to accept £(10) as the market
price – at £ the firm sells as much or
as little as it wants – note at say £11
there will be no demand
, Revenue
Total revenue = earnings = income = turnover
Total revenue = units sold x price per unit
TR = price x quantity
Marginal revenue = the change in total revenue following a change in output
change in TR
change in Q
Average revenue = price ( PxQ / Q)
Price Takers (smaller firms) Price Makers (large firms)
- No influence over it’s prices (can’t set - One which can influence the price of its
prices) output
- If it lowers prices all other firms will - Can lower prices to increase sales or
lower theirs to meet them so they increase them
technically cant get more customers - They can do this because there is some
- If they increase prices they will get less lack of competitiveness in the market
demand as price making firms keep their
lower prices
, COSTS
- What are the costs of producing a certain level of output
- Q = f ( factors of productions) Q = f ( K , L ) Law of diminishing
marginal product
Fixed costs
- Independent of output
Specialisation
and division
Variable costs of labour
- Dependent on output As more workers are added and output
- Marginal cost falls into this category increase Marginal product will rise and then
fall again as eventually productivity falls and
marginal product decreases with each
added worker. Eventually additional workers
may destroy value rather than create it.
U shape is because of
MC
Total cost = total fixed cost + total variable cost marginal productivity
TC = TFC + TVC having an effect of ATC
marginal costs AVC
Average cost = cost per unit
Marginal cost = the change is TC following a change in output
- Knowing unit costs is useful for establishing efficiency levels AFC
- Marginal cost is useful for decision making – should and extra
unit be produced, also useful to individuals
