Economics

The total effect of a price change of a commodity is substitution effect plus income effect. The income effect is the change in consumption patterns due to a change in purchasing power. This occurs with income increases, price changes, and even currency fluctuations. Since income is not a good in and of itself (it can only be exchanged for goods and services), price decreases increase purchasing power.

In monopoly, the relationship between average and marginal revenue curves is that AR curve lies above the MR curve.

When the perfectly competitive firm and industry are in long run equilibrium, then P = MR = SAC = LAC,
D = MR = SMC = LMC and,
P = MR = Lowest point on the LAC curve.

In a typical demand schedule, quantity demanded varies inversely with price. The law of demand states that a higher price typically leads to a lower quantity demanded.

Giffen goods are those goods for which demand increases as price increases. A Giffen good has an upward-sloping demand curve, which is contrary to the fundamental law of demand, which states that the quantity demanded for a product falls as the price increases, resulting in a downward slope for the demand curve.

The MC curve cuts the AVC and ATC curves at their respective minimas.

If two goods were perfect substitutes of each other, it necessarily follows that an indifference curve relating the two goods will be linear. As price rises for a fixed money income, the consumer seeks the less expensive substitute at a lower indifference curve.

Supply of a commodity is a flow concept. the commodity which the sellers or producers are able and willing to offer for sale at a particular price, during a certain period of time.

The cost that a firm incurs in hiring or purchasing any factor of production is referred to as Explicit cost. An explicit cost is a direct payment made to others in the course of running a business, such as wage, rent and materials, as opposed to implicit costs, where no actual payment is made.

In the long run, any firm will eventually leave the industry if Price does not at least cover average total cost. Exit is the long-run process of firms reducing production and shutting down in response to industry losses.