Portfolio

Takahiro Kono

Definitions

• Cost Theory: the theory that the price of an object or condition is determined by the sum of the cost of the resources that went into making it

• Revenue Theory: the change in total revenue earned by a firm that results from employing one more unit of labor

• Profit Theory: The positive gain from an investment or business operation after subtracting from all expenses

• Marginal Cost: Increase in total cost of producing an extr unit of output

• Total Costs: Total cost to produce a certain output TC=TFC+TVC

• Total Variable Cost: Total cost of the variable assets that a firm uses in a given period of time

• Total Fixed Costs: Total cost of fixed assets used in a given time period

• Price Discrimination: When firms actively adjust prices according to the willingness/ ability of different consumers to pay

• Macroeconomics: The Study of a national economy• GDP: Gross Domestic Product= Total value of all

spending in an economy

• GNP: Gross National Product= Total income earned by a nation’s factors of production regardless of where the assets are located

• Real GDP: Nominal GDP adjusted for inflation• Economic Development: A multidimensional concept that

includes poverty reduction, provision of education, health care and law and order, civil liberties and civic participation

• Aggregate Demand: The aggregate (total) spending on goods and service in a period of time at a given price level

• Aggregate Supply: The amount of goods and services that all industries will produce at a given price level

• Fluctuations in the growth of real output, consisting of periods of expansion and contraction called business cycles or trade cycles

• Recession: When the economy experiences two consecutive quarters of falling GDP

• Neoclassical Perspective: Price mechanism regulates markets, full employment achieved without intervention, economy is an harmonious system, perfect competitive equilibrium is the benchmark

• Keynesian Perspective: Price mechanism fails as wages are “downward sticky”, reaching full employment requires intervention, the economy is inherently unstable, the economy can get stuck in the SR

• Fiscal Policy: Increase government spending, decrease personal and/or business taxes, combination of both policies

• Monetary Policy: Increase money supply, lower interest rates (easy money)

• The Multiplier Effect: Any change in consumption, investment, government spending, and net exports. Prices induced expenditures, a chain reaction of further expenditures

• Crowding-out Effect: Governments borrow to finance fiscal policy, interest rates rise, private investment fails

• Unemployment: Number of adults who are not working but actively look for a job

• Underemployment: Number of adults who are working part-time but looking for full time work or people who are not fully using their skills

• Unemployment Rate: Number of unemployed as a percentage of the labor force

• Inflation: A continuing increase in the general price level of goods and service within the economy

• Deflation: A continuing decrease in the general price level of goods and service within the economy

• CPI (Consumer Price Index): Compares the value of a basket of goods and services in one year with a same basket in the base year

Diagrams

The Total Product Curve

Average and Marginal Product Curves

TFC, TVC, and TC

Cost Curves

LRAC

Economies and Diseconomies of Scale

Revenue Curves: Perfectly Esalstic Demand

5

Price

Output

D=AR=MR

Relationship between D, AR, MR, TR, and PED for a Normal Demand Curve

Shut Down Price

Profit Maximizing Level of Output with Perfectly Elastic Demand

Profit Maximizing Level of Output with Perfectly Elastic Demand

Profit Maximizing Level of Output with Normal Demand

Profit Maximizing Level of Output with Normal Demand

Normal Profit Normal Demand

Abnormal Profit Normal Demand

Loss Normal Demand

Profit, Sales, and Revenue Maximization

Profit, Sales, and Revenue Maximization

Price Discrimination Example Total Ticket Sales

Price Discrimination Example Adult Tickets

Price Discrimination Example Adult Tickets

Productive Efficiency: Resources are not wasted

Allocative Efficiency/ Socially Optimum Level of Output

Perfect Competition Versus Monopoly

Perfect Competition Versus Monopoly

Aggregate Demand Curve

Shifts in AD

Demand for investment funds

Aggregate Supply in the Short Run

Shifts in SRAS

Macroeconomic Equilibrium

Shifts in AD

Shifts in SRAS

Business Cycle

Using Diagrams to Illustrate Macroeconomic Goals

Using Diagrams to Illustrate Macroeconomic Goals

Changes in AD

Changes in SRAS

Deflationary (recessionary) Gap

Inflationary Gap

Full Employment Level of Output

Changes in AD

Changes in AS

Neoclassical (Free Market) LRAS

Long-run Equilibrium

Long-run equilibrium and Decline in AD

Return to Long-run equilibrium

Long-run equilibrium

Long-run equilibrium and Increase in AD

Return to Long-run equilibrium

Keynesian SR/LRAS

Inflationary Gap in the Keynesian Perspective

Full Employment Equilibrium in the Keynesian Perspective

Economic Growth: Neoclasical Perspective

Economic Growth: Keynesian Perspective

The Multiplier Effect

Crowding-out Effect

Crowding-out Effect

Demand-pull Inflation

Cost-push Inflation

“Good” Deflation

Phillips Curve

Phillips Curve