Profit:
In common terminology excess of revenue over its cost is profit. In Economics we refer to profits as rewards to the organization (entrepreneur) as a factor of production for its participation in the process of production.
Profit is further split into Gross profit, which is Total Revenue less explicit costs that are shown on in the books of accounts. Gross Profits less Depreciation and Taxes are termed Net Profits.
Optimisation:
Optimisation is making the best possible use of available resources to obtain the maximum possible desired quality of output.
Average and Marginal:
These concepts are applicable to revenue, cost, and propensity to consume and save.
Average cost (AC) = Total cost/Units of Output Produced
While marginal cost (MC) is additional cost for producing additional unit of output.
Either,
MCnth = TCn - TCn-1
Or
MC = ΔTC/ΔQ
Elasticity:
By elasticity we mean the degree of responsiveness of change in one variable brought about by the change in some other variable. Thus degree of responsiveness of quantity demanded of X to the change in price of X is called Price Elasticity of Demand.
In common terminology excess of revenue over its cost is profit. In Economics we refer to profits as rewards to the organization (entrepreneur) as a factor of production for its participation in the process of production.
Profit is further split into Gross profit, which is Total Revenue less explicit costs that are shown on in the books of accounts. Gross Profits less Depreciation and Taxes are termed Net Profits.
Optimisation:
Optimisation is making the best possible use of available resources to obtain the maximum possible desired quality of output.
Average and Marginal:
These concepts are applicable to revenue, cost, and propensity to consume and save.
Average cost (AC) = Total cost/Units of Output Produced
While marginal cost (MC) is additional cost for producing additional unit of output.
Either,
MCnth = TCn - TCn-1
Or
MC = ΔTC/ΔQ
Elasticity:
By elasticity we mean the degree of responsiveness of change in one variable brought about by the change in some other variable. Thus degree of responsiveness of quantity demanded of X to the change in price of X is called Price Elasticity of Demand.
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