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Production, costs, and pricing

 

 
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Production, costs, and pricing
 
 
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In microeconomics
Microeconomics

Microeconomics is a branch of economics that studies how individuals, households and firms and some states make decisions to allocate limited resources, typically in markets where goods or services are being bought and sold....
, industrial organization
Industrial organization

Industrial organization is a field of economics that studies the strategic behavior of firms, the structure of markets and their interactions. The study of industrial organization adds to the perfectly competitive model real-world frictions such as limited information, transaction cost, cost of adjusting prices, government actions, and barrie...
 is the field which describes the behavior of firms in the marketplace with regard to production, pricing, employment and other decisions. Topics in this field range from classical issues such as opportunity cost
Opportunity cost

Opportunity cost or economic opportunity loss is the value of the next best alternative foregone as the result of making a decision. Opportunity cost analysis is an important part of a company's decision-making processes but is not treated as an actual cost in any financial statement....
 to neoclassical concepts such as factors of production
Factors of production

In economics, factors of production are the resources employed to produce Good and services. Here the rate of output is modeled as a production function of the rate of use of each input employed.They are generally land, labor, and capital; the three groups of resources that are used to make all goods and services....
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In microeconomics
Microeconomics

Microeconomics is a branch of economics that studies how individuals, households and firms and some states make decisions to allocate limited resources, typically in markets where goods or services are being bought and sold....
, industrial organization
Industrial organization

Industrial organization is a field of economics that studies the strategic behavior of firms, the structure of markets and their interactions. The study of industrial organization adds to the perfectly competitive model real-world frictions such as limited information, transaction cost, cost of adjusting prices, government actions, and barrie...
 is the field which describes the behavior of firms in the marketplace with regard to production, pricing, employment and other decisions. Topics in this field range from classical issues such as opportunity cost
Opportunity cost

Opportunity cost or economic opportunity loss is the value of the next best alternative foregone as the result of making a decision. Opportunity cost analysis is an important part of a company's decision-making processes but is not treated as an actual cost in any financial statement....
 to neoclassical concepts such as factors of production
Factors of production

In economics, factors of production are the resources employed to produce Good and services. Here the rate of output is modeled as a production function of the rate of use of each input employed.They are generally land, labor, and capital; the three groups of resources that are used to make all goods and services....
.

List of topics

  • Production theory basics
    Production theory basics

    In microeconomics, production is quite simply the conversion of inputs into outputs. It is an economic process that uses resources to create a good or service that is suitable for trade....
    • production efficiency
    • factors of production
      Factors of production

      In economics, factors of production are the resources employed to produce Good and services. Here the rate of output is modeled as a production function of the rate of use of each input employed.They are generally land, labor, and capital; the three groups of resources that are used to make all goods and services....
    • total, average, and marginal product curves
    • marginal productivity
    • isoquant
      Isoquant

      In economics, an isoquant is a contour line drawn through the set of points at which the same quantity of output is produced while changing the quantities of two or more inputs....
      s & isocost
      Isocost

      In economics an isocost line represents a combination of inputs which all cost the same amount. Although similar to the budget constraint in consumer theory, the use of the isocost pertains to cost-minimization in production, as opposed to utility-maximization....
      s
    • the marginal rate of technical substitution
  • Economic rent
    Economic rent

    Economic rent is the difference between what a factor of production is paid and how much it would need to be paid to remain in its current use....
    • classical factor rents
    • Paretian factor rents
  • Production possibility frontier
    Production possibility frontier

    In economics, a production-possibility frontier or ?transformation curve? is a graph that shows the different rates of production of two goods that an individual or group can efficiently produce with limited productive resources....
    • what products are possible given a set of resources
    • the trade-off between producing one product rather than another
    • the marginal rate of transformation
  • Production function
    Production function

    In economics, a production function is a Function that specifies the output of a firm, an industry, or an entire economy for all combinations of inputs....
    • inputs
    • diminishing returns to inputs
    • the stages of production
    • shifts in a production function
  • Cost theory
    • the different types of cost
      Cost

      In economics, business, retail, and accounting, a cost is the value of money that has been used up to produce something, and hence is not available for use anymore....
      s
      • opportunity cost
        Opportunity cost

        Opportunity cost or economic opportunity loss is the value of the next best alternative foregone as the result of making a decision. Opportunity cost analysis is an important part of a company's decision-making processes but is not treated as an actual cost in any financial statement....
      • accounting cost or historical costs
      • transaction cost
        Transaction cost

        In economics and related disciplines, a transaction cost is a cost incurred in making an economic exchange. For example, most people, when buying or selling a stock, must pay a commission to their stock broker; that commission is a transaction cost of doing the stock deal....
      • sunk cost
        Sunk cost

        In economics and business decision-making, sunk costs are costs that cannot be recovered once they have been incurred. Sunk costs are sometimes contrasted with variable costs, which are the costs that will change due to the proposed course of action, and prospective costs which are costs that will be incurred if an action is taken....
      • marginal cost
        Marginal cost

        In economics and finance, marginal cost is the change in total cost that arises when the quantity produced changes by one unit. It is the cost of producing one more unit of a good....
    • the isocost line
  • Cost-of-production theory of value
    Cost-of-production theory of value

    In economics, the cost-of-production theory of value is the theory that the price of an object or condition is determined by the sum of the cost of the resources that went into making it....
  • Long-run cost and production functions
    • long-run average cost
    • long-run production function and efficiency
    • returns to scale and isoclines
    • minimum efficient scale
    • plant capacity
  • Economies of density
  • Economies of scale
    Economies of scale

    Economies of scale, in microeconomics, are the cost advantages that a business obtains due to expansion. They are factors that cause a producer?s average cost per unit to fall as output rises....
    • the efficiency consequences of increasing or decreasing the level of production
  • Economies of scope
    Economies of scope

    Economies of scope are conceptually similar to economies of scale. Whereas economies of scale primarily refer to efficiencies associated with supply-side changes, such as increasing or decreasing the scale of production, of a single product type, economies of scope refer to efficiencies primarily associated with demand-side changes, such...
    • the efficiency consequences of increasing or decreasing the number of different types of products produced, promoted, and distributed
  • Optimum factor allocation
    • output elasticity of factor cost
      Factor cost

      Factor cost or national income by type of income is a measure of national income or output based on the cost of factors of production, instead of market prices....
      s
    • marginal revenue product
    • marginal resource cost
  • Pricing
    Pricing

    Pricing is one of the four Ps of the marketing mix. The other three aspects are product, promotion, and Distribution . It is also a key variable in microeconomic price allocation theory....
    • various aspects of the pricing decision
  • Transfer pricing
    Transfer pricing

    Transfer pricing refers to the pricing of contributions transferred within an organization. For example, goods from the production division may be sold to the marketing division, or goods from a parent company may be sold to a foreign subsidiary....
    • selling within a multi-divisional company
  • Joint product pricing
    Joint product pricing

    Pricing for joint products is a little more complex than pricing for a single product. To begin with there are two demand curves. The characteristics of each demand curve could be different....
    • price setting when two products are linked
  • Price discrimination
    Price discrimination

    Price discrimination exists when sales of identical good or Service are transacted at different prices from the same provider. In a theoretical market with perfect information, no transaction costs or prohibition on secondary exchange to prevent arbitrage, price discrimination can only be a feature of monopoly and oligopoly markets, where...
    • different prices to different buyers
    • types of price discrimination
    • yield management
      Yield management

      Yield management, also known as revenue management, is the process of understanding, anticipating and influencing consumer behavior in order to maximize revenue or profits from a fixed, perishable resource ....
  • Price skimming
    Price skimming

    Price skimming is a pricing in which a marketing sets a relatively high price for a product or Service at first, then lowers the price over time....
    • price discrimination over time
  • Two part tariffs
    • charging a price composed of two parts, usually an initial fee and an ongoing fee
  • Price points
    • the effects of a non-linear demand curve on pricing
  • Cost-plus pricing
    Cost-plus pricing

    Cost-plus pricing is a pricing method used by companies. It is used primarily because it is easy to calculate and requires little information. There are several varieties, but the common thread in all of them is that one first calculates the cost of the product, then includes an additional amount to represent profit....
    • a markup
      Markup (business)

      Markup is the difference between the cost of a Good or Service and its selling price. A markup is added on to the total cost incurred by the producer of a good or service in order to create a Profit ....
       is applied to a cost term in order to calculate price
    • cost-plus pricing with elasticity considerations
      Cost-plus pricing with elasticity considerations

      One of the most common pricing methods used by firms is cost-plus pricing. In spite of its ubiquity, economists rightly point out that it has serious methodological flaws....
    • cost plus pricing is often used along with break even analysis
      Break even analysis

      ----The breakeven for a product is the point where total revenue received equals the total costs associated with the sale of the product . A break-even point is typically calculated in order for businesses to determine if it would be profitable to sell a proposed product, as opposed to attempting to modify an existing product instead so it can be...
  • Rate of return pricing
    Rate of return pricing

    Target rate of return pricing is a pricing method used almost exclusively by market leaders or monopoly. You start with a rate of return objective, like 5% of invested capital, or 10% of sales revenue....
    • calculate price based on the required rate of return on investment, or rate of return on sales
  • Profit maximization
    Profit maximization

    In economics, profit maximization is the process by which a firm determines the price and output level that returns the greatest profit. There are several approaches to this problem....
    • determining the optimum price and quantity
    • the totals approach
    • marginal approach of production


See also

  • Industrial organization
    Industrial organization

    Industrial organization is a field of economics that studies the strategic behavior of firms, the structure of markets and their interactions. The study of industrial organization adds to the perfectly competitive model real-world frictions such as limited information, transaction cost, cost of adjusting prices, government actions, and barrie...
  • Important publications in production theory
    List of publications in economics

    MacroeconomicsAmong the most important list of publication in economics are:...
  • Microeconomics
    Microeconomics

    Microeconomics is a branch of economics that studies how individuals, households and firms and some states make decisions to allocate limited resources, typically in markets where goods or services are being bought and sold....
  • Production run