Chapter 4:
Define marginal cost and marginal revenue, and understand how to use them for decision-making.
Define fixed cost and recognize its irrelevance to decision-making.
Chapter 5:
Understand discounting & compounding.
Know how to calculate and use net present value to determine the profitability or otherwise of investments.
Define and calculate break-even quantity and price, and a firm’s shut-down decision.
Chapter 6:
Describe the law of demand, consumer surplus, and aggregate demand.
Use marginal analysis (marginal cost & marginal revenue) to make pricing and output decisions.
Understand price elasticity of demand (PED) and its value in calculating a firm’s desired margin, and the factors that make the demand for a good more elastic. Use current margin and desired margin to make optimal pricing decisions.
Apply stay-even analysis to the determination of whether a price increase is profitable or not.
