Alternative, Opportunity or Transfer Costs

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Alternative, Opportunity or Transfer Costs In modem economic analysis, the term real cost is interpreted in the sense of opportunity cost or transfer cost. The American economist Davenport explains this concept as follows: “Suppose. for example. that a child has been given both a pear and a peach. that some predatory boy tries to seize them and that the only method of […]

Significance of Opportunity Costs.

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Significance of Opportunity Costs. There are competing demands (depending upon the marginal utility of the consumers) for the same resources. Since the resources are scarce, certain demands are satisfied only at the sacrifice of other demands. The resources . tend to move from those use in which their demand price (marginal utility to the consumers in the aggregate) is lower to those […]

Application of Opportunity Cost Doctrine

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Application of Opportunity Cost Doctrine The opportunity cost doctrine has a wide application in the field of economic theory. It applies to the dctc reunion of values both internally and internationally. It also applies to income distribution. Lin citation». There arc, however, some limitations in its application: (i) Specific. It does not apply to productive services which are specific. A specific factor has […]

Role Of Price Machanism

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Role Of Price Mechanism While we cannot ignore the various criticisms leveled against the price systell ami some of them arc reasonably valid, we have to concede that the Sanctioning of the price system is conducive to economic efficiency. i.c.. efficient allocation of community ‘s product ivc rest sources. On the whole, it may be said that working of the capitalistic system is […]

FUNCTIONS OF THE PRICE SYSTEM

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FUNCTIONS OF THE PRICE SYSTEM The price system function such a manner that the adjustments in the System  take place almost automatically without and direction oror dictation from a central authority, Pnce IS the coordinator both of production and COli umption. The consumers arc able to convey their preferences through thc prices they arc willing to offcr. Similarly, the producers […]

CONCLUSION

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CONCLUSION The purpose of this chapter has been to develop some tools that we can use to study how  make production and pricing decisions. You should now understand what economists mean by. the term costs  how costs vary with the quantity of output a firm produces. To refresh your memory, Table 3 summarize. some of the definitions […]