BUSINESS ECONOMICS

ELASTICITY
Elasticity is a general concept that can be used to quantify the response in one
variable when another variable changes.











Elasticity is always (+) positive, if its (-) negative then its Inelastic









elasticity of A with respect to B
A
B

%
%

price elasticity of demand

% change in quantity demanded
change in price

%
% change in price x 100%
2

P P
P
1
1
% change in quantity demanded x 100%
2

Q Q
Q
1
1
%
%
( ) /
( ) /

Q
P
Q Q
Q Q
P P
P P
d

2 1
1 2
2 1
1 2
2
100%
2
x
x 100%
COUNTRIES POWER
EXCHANGE RATE





TRADE SURPLUS
An economic measure of a positive balance of trade, where a country's exports
exceeds its imports. A trade surplus represents a net inflow of domestic currency
from foreign markets, and is the opposite of a trade deficit, which would
represent a net outflow.
When a nation has a trade surplus, it has control over the majority of its own
currency. This causes a reduction of risk for another nation selling this currency,
which causes a drop in its value. When the currency loses value, it makes it
more expensive to purchase imports, causing an even a greater imbalance.
INTEREST RATE





UN-EMPLOYMENT RATE



Gross domestic product (GDP) is the market value of all officially recognized final goods
and services produced within a country in a given period of time. GDP per capita is often
considered an indicator of a country's standard of living;
[2][3]
GDP per capita is not a measure
of personal income (See Standard of living and GDP). Under economic theory, GDP per
capita exactly equals the gross domestic income (GDI) per capita (See Gross domestic
income).
GDP is related to national accounts, a subject in macroeconomics. GDP is not to be
confused with gross national product (GNP) which allocates production based on ownership.
OPPORTUNITY COST
Decisions involve several alternatives. The principle of opportunity cost can also be applied
to decisions about how to spend money from a fixed budget.
For example; suppose that you have a fixed budget to spend on music. You can either buy
your music at a local music store for $15 per CD or you can buy your music online for $1 per
song. The opportunity cost of 1 CD is 15 one-dollar online songs. A hospital with a fixed
salary budget can increase the number of doctors only at the expense of nurses or physicians
assistants. If a doctor costs five times as much as a nurse, the opportunity cost of a doctor is 5
nurses.




















INFLATION AND UNEMPLOYMENT

UNEMPLOYMENT
During periods of poor economic performance, such as economic recessions when real GDP declines,
unemployment rises sharply and becomes a cause of public concern.
During times of good economic performance and rapid economic growth, unemployment is reduced
but does not disappear.


THREE TYPES OF UNEMPLOYMENT
Cyclical unemployment is the unemployment that accompanies fluctuations in real
GDP.
Frictional unemployment is the unemployment that occurs naturally during the
normal workings of an economy. It occurs because it simply takes time for people to
find the right jobs and for employers to find the right people to hire.
Structural unemployment occurs when the economy evolves. It occurs when
different sectors give way to other sectors or certain jobs are eliminated while new
types of jobs are created.

INFLATION
A sustained, rapid increase in prices, as measured by some broad index (such as Consumer
Price Index) over months or years, and mirrored in the correspondingly
decreasing purchasing power of the currency. It has its worst effect on the fixed-wage
earners, and is a disincentive to save.
There is no one single, universally accepted cause of inflation, and the modern
economic theory describes three types of inflation: (1) Cost-push inflation
is due to wage increases that cause businesses to raise prices to cover higher labour costs,
which leads to demand for still higher wages (the wage-price spiral), (2) Demand-pull
inflation results from increasing consumer demand financed by easier availability of credit;
(3) Monetary inflation caused by the expansion in money supply (due to printing of
more money by a government to cover its deficits). See also deflation and hyperinflation.