The paper "Micro and Macroeconomic Analysis " is an outstanding example of a micro and macroeconomic assignment. Elasticity increases with the increasing price and the demand increase more in (q4-q3/p1-p2) than in (q2-q1/p3-p4). At the top, it begins with perfectly inelastic demand in which quantity demanded does not change irrespective of any price change. Elasticity moves down to perfect elasticity whereby there is only one price at which consumers are prepared to pay (Hirschey, 2009). In the case of using price adjustments to increase sales, it is better to use an inelastic demand because consumers do not react so much on the price increase.
In fact, in a perfectly inelastic demand curve, consumers are willing and able to buy the product at any price set. d. The primal objective of every firm is to maximize profit by producing output that would help the firm achieve this objective. In doing this, the link between the cost of production and profits attained must be correctly checked, thus the criticality of the firm’ s determination of how much is produced of the output. In the short-run, a firm potentially increases output through the increment of the variable factor amounts (Hirschey, 2009).
The firm, in this case, maximizes profit at the point where the MC equals the MR. However, by considering the current and future equilibrium of the supply and demand, the firm adjusts to the long-run profit mechanism. As argued by Mukherje, et. al. (2003), the implicit costs of a firm, consisting of the opportunity costs, and the explicit costs are very crucial in linking the various kinds of profits both in the long-run and the short-run.
The diagram below illustrates the short-run profit maximization case of a firm. P MC ATC P D=AR=MR Economic profit C Q Q Short-turn profit is maximized where the MC curve cuts the MR curve. Part 2 Collect data on economic growth, unemployment rate, and inflation rate for Australia from 1986 to 2005. Present each of the above in three separate tables and three separate line graphs.
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