A firm maximizes profit where MR = MC (subject to conditions).
Tight monetary policy reduces credit and demand to control inflation.
Skimming works for new/innovative products with strong demand from early adopters and limited initial competition.
Cyclical unemployment rises during recession due to lower demand and output.
Disguised unemployment occurs when more workers are engaged than needed, often in agriculture.
In the short run, Phillips curve suggests a trade-off: lower unemployment may come with higher inflation.
Cost-plus pricing is easy but often ignores demand/elasticity and competitor reactions.
A price change causes extension/contraction along the same demand curve (quantity demanded changes).
For Veblen goods, higher price can increase demand due to status/prestige effect.
Unitary elasticity means proportionate change in Q equals proportionate change in P.
Production function relates inputs (L, K, etc.) to output (Q).
Monopolistic competition has many firms selling differentiated products and using advertising.
Leading indicators (like new orders) typically change before overall economic activity changes.
In recession, demand and output fall and unemployment rises.
More substitutes means consumers can switch easily, making demand more elastic.
Contractionary policy reduces money supply/credit to control inflation.
Monopoly has a single seller with strong barriers and no close substitutes.
MC cuts AC at the minimum point of AC (and similarly for AVC).
A deficit indicates net foreign exchange outflow (needs financing through capital inflows or reserves).
Price elasticity shows how quantity demanded responds to a change in price.
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