A: Marginal revenue is the change made in total revenue a company makes caused by an additional item being produced. This is calculated by figuring the difference between the revenue produced both before and after a single unit increase in the production rate. If the price of a product is constant, the marginal revenue and price are the same. Sometimes an additional item will only sell if the price goes down and that leads to the consideration of marginal cost or the cost of producing one more item. If marginal cost exceeds marginal revenue, further production is not recommended since it would result in a loss. If marginal revenue exceeds marginal cost, then the production of an additional unit would be advised since it would result in an increase in profit. The marginal revenue received by a firm is the change in total revenue divided by the change in quantity, often expressed as this simple equation: marginal revenue| =| change in total revenuechange quantity| [ (Marginal Revenue) ]

B: Marginal cost is the variation in the total cost of production as a result of the production of one more or one less unit. Marginal cost is important in figuring out whether or not to vary the production rate. Typically, marginal cost decreases as the output increases due to factors such as the cost of bulk rate materials, the efficient use of the existing equipment and labor specializations of the employees. A sale at a price higher than the average marginal cost will result in the company making more profit even though the price doesn’t cover the average total unit cost. Marginal cost can be seen as the lowest amount at which a sale can be made without subtracting from the profits of a company. Marginal Cost = Total Cost divided by Quantity or (Marginal Cost)

C: Profit is the return on investment after the cost of production and all other business charges. For example, if a company spends $80,000 in the production of a product and the total sales...

...EGT1Task 2:
Elasticity of demand, also known as price elasticity of demand is defined as: measuring the responsiveness of demand to changes in price for a particular good. If the price elasticity of demand is equal to 0, demand is perfectly inelastic. Values between zero and one indicate that demand is inelastic. When price elasticity of demand equals one, demand is unit elastic. Finally, if the value is greater than one, demand is perfectly elastic. (Investopedia US, A Division of ValueClick, Inc., 2013) A perfectly elastic demand curve is horizontal and a vertical curve represents a perfectly inelastic demand curve. Elastic demand is a large change in quantity purchased for a given price change. The coefficient ends up as greater then one because the numerator is larger then the denominator in the equation. With inelastic demand there is a small change in quantity purchased for a given price change. The coefficient ends up less than one because the numerator is smaller then the denominator in the equation. Unit elastic is the quantity demanded and own price change the same percentage. The coefficient ends up being equal to one because the numerator and denominator are the same.
Cross price elasticity of demand can be defined as measuring the percentage change in demand for a specific good caused by a percent change in the price of another good. There are two kinds of goods, complements and substitutes. Complement goods are goods...

...EGT1 – Task 2
Elasticity of Demand:
Price elasticity of demand is the method used to quantify how reactive consumers will be to changing prices. It is calculated by dividing the percentage change in quantity of an item demanded by the percentage change in the item price.
Elastic demand is when the percentage price increases results in a greater percentage decrease in demand or the reverse, when the percentage price decreases and results in a greater percentage increase in demand.
Conversely, inelastic demand is when the percentage price increase results in a lesser percentage decrease in demand, or the percentage price decrease results in a lesser percentage increase in demand.
On the other hand, unit elasticity is when the percentage increase or decrease in price results in an equal percentage decrease or increase in demand.
Cross Price Elasticity:
Cross price elasticity quantifies how reactive people are when purchasing one item, based on price changes of another item. It is calculated dividing the percentage change of the quantity demanded of the first item by the percentage change in the second item’s price.
One type of cross price elasticity relates to substitute goods where the consumer has the option to choose between many similar goods. In this situation the consumer will likely substitute one good for the lower priced similar product. Substitute goods are established when the cross price elasticity...

...EGT1Task 2
A)
Elasticity of Demand pertains to the relationship of price and need of a product. If a price increases will the demand increase or decrease? When a demand is elastic, it means even a small change in price can cause a large change in the quantities consumers purchase. (McConnell, pg. 77) So for example in an elastic demand if you reduce the price of a good the demand will increase a large amount and revenue then increases. When the is inelastic, according to McConnell it means when there is a price change it only causes a small change in the amounts consumer purchase. This can result in less total revenue. If a company drops the price of something, even if they sell more it doesn’t mean they will make more overall. If it is inelastic, the revenue can drop. There is also something called perfectly inelastic, which means and change in price results in absolutely no change in demand. This is rare and an extreme situation. There is also demand in unit elastic which “demands occurs where a percentage change in price and the resulting percentage change in quantity demanded are the same”. (McConnell, pg. 77)
B) Cross elasticity of demand measures two different products and their response to price changes. So if a consumer purchases one product cross elasticity measures how sensitive that consumer is to the change in the price of another product. It is measured by the percentage changes in demand for the first product that occurs in...

...EGT1Task: 309.1.1.05, 06
In business there are certain factors that have to be evaluated before a company can see if a profit has been made. To even get to the point where a profit will be made there has to be a product that is sold whether it is a tangible or an intangible product. There has to be something that the business is selling in order to make that profit. The amount of profit that is attained is the outcome of the total revenue minus the total cost. This will then show the business what the remaining profit is. Business is like a puzzle, all the pieces have to fit and work together to have the puzzle complete. In business things have to work together or it won’t work and all the hard work that was put in to making a successful business is lost. To fully understand how a company makes a profit, certain areas need to be defined and shown the relationship between them to see how things work in business.
Define Marginal Revenue:
“Marginal Revenue is the change in total revenue that results from selling one more unit of output.” (McConnel, 2012) What this means is marginal revenue occurs when total revenue changes, whether it be higher or lower in production. Any change that occurs in total revenue is when marginal revenue takes place.
Explain its relationship with Total Revenue:
First, total revenue needs to be defined. “Total revenue is the total number of dollars received by a firm from the sale...

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EGT1 – TASK 1
Western Governors University
EGT1 Economics and Global Business Applications
Element A1 & A2
A1. Total revenue (TR) to total cost (TC) is cost, which is calculated using total revenue minus the total cost, (TR-TC). As each unit is produced, the total cost increases in addition to the total revenue. Yet, at some point in the production of the additional units, the total revenue will exceed the total cost. When it reaches that point, it becomes a loss. The point when profit maximization is the largest is bolded in the table below.
QTY
TR
TC
TR-TC
0
$0.00
$100.00
-$100.00
1
$131.00
$190.00
-$59.00
2
$262.00
$270.00
-$8.00
3
$393.00
$340.00
$53.00
4
$524.00
$400.00
$124.00
5
$655.00
$470.00
$185.00
6
$786.00
$550.00
$236.00
7
$917.00
$640.00
$277.00
8
$1,048.00
$750.00
$298.00
9
$1,179.00
$880.00
$299.00
10
$1,310.00
$1,030.00
$280.00
A2. Marginal revenue (MR) is extra profit a company makes selling one more unit of a product. Marginal cost (MC) is the expenditure to the company to produce one more product. This is calculated taking the total cost (TC) of the last product made and subtracting the total cost (TC) of the product before that. The graph shows, it costs $30 to make one product and $50 to make two. (MC) is $50 minus $30, equalling $20. (MC) goes up $10 for every additional product. This increases from making one product...

...EGT1Task 1
In this paper I am going to define a few common economic terms and explain their relationships to other economic terms. I will also explain how profit maximizing firms determine their optimal level of output and how a profit maximizing firm will react to different levels of marginal revenue. Marginal revenue is the extra revenue that will be made by a firm when the firm sells one additional unit of a product. Total revenue is simply the sum of a firm's sales of a specified quantity of a particular product. So, while marginal revenue is telling how much extra money selling each additional product will make a firm, total revenue is telling how much the firm will make by selling a given quantity. Marginal cost is the what it will cost a firm to produce one more unit of product. Total cost is the total economic cost a firm incurs for producing a given quantity of a certain product. Profit is simply the a firm's total revenue after the firm pays for its operating costs, and profit maximization is the the course of action that a firm takes to determine how much they will produce and what they will charge per unit of production in order to provide the firm with the greatest possible profit in either the long run or the short run time frame of a firm. A profit-maximizing firm determines its optimal level of out put by finding the point where marginal cost is equal to marginal revenue. Meaning that, when the cost of producing an...

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Task
In this given situation a company exists in a monopolistic competition where a company sells widgets. As more widget are sold the company must offer discounts on the product in order to sell more units. The table below includes the Total Revenue and Total Cost information needed to perform marginal revenue and marginal cost calculations that will be explained below.
Quantity0123456789101112131415Quantity0123456789101112131415
TR$0.00$150.00$290.00$420.00$540.00$650.00$750.00$840.00$920.00$990.00$1,050.00$1,100.00$1,140.00$1,170.00$1,190.00$1,200.00TR$0.00$150.00$290.00$420.00$540.00$650.00$750.00$840.00$920.00$990.00$1,050.00$1,100.00$1,140.00$1,170.00$1,190.00$1,200.00
TC$10.00$30.00$50.00$80.00$120.00$170.00$230.00$300.00$380.00$470.00$570.00$680.00$800.00$930.00$1,070.00$1,220.00 Profit maximization in terms of total revenue to total cost can be approached in two different ways. The first is to take total revenue and total cost for a time period and subtract total cost from total revenue for each unit produced to determine how many units produced would yield the highest profit. To do this in this scenario I have illustrated it in the chart below.
TCTR - TC$10.00$-10.00$30.00$120.00$50.00$140.00$80.00$360.00$120.00$420.00$170.00$480.00$230.00$520.00$300.00$540.00$380.00$540.00$470.00$520.00$570.00$480.00$680.00$420.00$800.00$340.00$930.00$240.00$1,070.00$120.00$1,220.00$-20.00 As you can see in the highlighted section above at 8 units...

...A. Discuss elasticity of demand as it pertains to elastic, unit, and inelastic demand.
Elasticity of demand is gauged by the percentage of change in demand when the price of an item varies. If the change in the quantity demanded is greater than 1 the demand is elastic.
Elasticity of demand is calculated by ED=quantity demanded/decrease in price. If you reduce the price of milk by 6%, and that causes an increase of quantity demanded by 9% the demand for milk is elastic (ED= .09/.06 = 1.5).
Unit elasticity is when the change in demand for an item is equal to the change in price. In this example the price of milk is reduced by 3% which in turn results in an increase of demand by 3% t.
When the change in price percent is less than the change in demand percent, this is referred to as inelasticity. For this example, let’s say we have a 6% reduction in the price of bread but it only increases the demand by 3%.
B. Discuss cross price elasticity as it pertains to substitute goods and complementary goods.
Cross-price elasticity measures the responsiveness of the demand for a good to a change in the price of another good. When measuring the cross price elasticity, the coefficient can be either negative or positive (McConnell, 2012). Substitute Goods is a positive cross elasticity. When similar manufactured goods move in the same direction when there is a change in price. Let’s compare iPads and Tablets, when the price of the iPads increases, the...