# Study Session 4: Economics: Microeconomic and Macroeconomics

## Economics

Can somebody please explain how is it derived?

Change in total revenue (ΔTR), the numerator of the ratio, can be written as (P)(ΔQ) + (Q)(ΔP).

## Qd @ perfectly elastic

What will happen to Qd of a perfectly eleatic good when price drops? Qd remain constant?!!

## Inferior & giffen

Can I say that the giffen good is a type inferior goods with the lowest prices/quality/level??

## Reading 15- Practice Question 19

Hi All,

Grateful if you could help on the below and advise why the question cannot be A or C?

Deep River Manufacturing is one of many companies in an industry that make a food product. Deep River units are identical up to the point they are labeled. Deep River produces its labeled brand, which sells for \$2.20 per unit, and “house brands” for seven different grocery chains which sell for \$2.00 per unit. Each grocery chain sells both the Deep River brand and its house brand. The best characterization of Deep River’s market is:

## Reading 15 - Firm and market structures - Practice Problem 5

Hi All,

I have the following question that I would like to understand :

The demand schedule in a perfectly competitive market is given by P = 93 – 1.5Q (for Q ≤ 62) and the long-run cost structure of each company is:
Total cost:     256 + 2Q + 4Q2
Average cost:     256/Q + 2 + 4Q
Marginal cost:     2 + 8Q

New companies will enter the market at any price greater than ? : 66

My questions are :

## Demand

The monthly demand curve for playing tennis at a particular club is given by the following equation: PTennis Match = 9 − 0.20 × QTennis Match. The club currently charges members \$4.00 to play a match but is considering adding a membership fee. If the club continues to charge the same per play charge, the most that it will be able to charge as a membership fee is closest to:

1. \$62.50.
2. \$162.50.
3. \$40.00.

Solution

A is correct. On rearrangement, the demand function is:

## AD / AS - Difference between Price Level, Output Price, and Input price?

Working through the Macroeconmics section and not entirely understanding this:

Looking at the Aggregate Supply Curve(s) - when they speak of Price Level, vs Input Price vs Output Price.

How can I think about each (how are they entirely different) from the AS point of view?

Price Level:

Input Price:

Output Price:

Been 20 years since I tackled macro, slowly coming back to me….. thank you.

## Economics - Reading 16 - GDP Question

I was going through Kaplan reading material for Module 16.1 and was having trouble understanding the Q8. in Module 16.1 Quiz. The question is reproduced below along with the solution:

If a government budget deficit increases, net exports must:

## In perfect competition, why is there economic loss if marginal cost > marginal revenue?

Consider the following graph

I read from CFA L1 notes that “At any output above the quantity where MR=MC, the firm will be generating losses on its marginal production and will maximize profits by reducing output to where MR=MC.” But now consider this: