Cost Concepts and Design Economics - General Economic Environment

4 important questions on Cost Concepts and Design Economics - General Economic Environment

Give the definition of consumer goods and services

Products and services that are directly used by people to satisfy their wants. Such as food, clothing, homes, cars, televisions.

Explain the relationship of demand and amount paid, include the formula in the explanation.

There is a direct relationship between the price that must be paid and the quantity that will be demanded or purchased.


p = a -bD

p  = price per unit
a  = intercept on the price axis
-b = the slope, amount by which demand increases for each unit decrease in p
D  = demand

  • How to calculate the total revenue?
  • How can the relationship between price and demand be included?

TR = price * demand
TR = aD-bD2

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Why do most businesses not obtain maximum profits by maximizing their revenues?

Due to cost-volume relationships, which is not a linear relationship.

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