Economic Objectives Flashcards
(14 cards)
What is the margin?
The margin is the change in a variable caused by an increase of one unit of another variable.
What does traditional economic theory do?
Assumes that economic agents want to maximise their utility
What is marginal utility?
The benefit gained from consuming one additional unit of good.
What is the total utility?
The overall benefit from consuming a good
What is the law of diminishing returns?
For each additional unit of good consumed, the marginal utility decreases.
What are the economic agents?
Producers
Consumers
Governments
What is profit?
Total Revenue - Total Costs
What are economic objectives for producers?
Profit
Total Sales
Market Share
Ethical Objectives
How is profit an objective for firms?
Profits allow firms to survive
Better rewards to staff or shareholders
Profits can be reinvested
How is Total Sales/Market Share an objective for firms?
A larger market share could lead to monopoly power
Bigger firms are viewed as more prestigious and stable
How is ethics an objective for firms?
Doing good
What are economic objectives for consumers?
Utility
How is utility an objective for firms?
People want more satisfaction
What are economic objectives for governments?
Economic growth
Full employment
Low inflation
