Unit 1
·
Macroeconomics- study of the economy as a whole
(looking at the big picture)
Inflation
International trade
Wages
·
Microeconomics- study of individual or specific
units of the economy
supply &demand
market structures
business organizations
·
Positive economics- attempts to describes the world as is.
Very descriptive, describes “what is”,
collect and presents facts
·
Normative Economics- attempts to prescribe the world should be
“ought to be”, “should be”
Opinion
·
Needs- basic requirements for survival
·
Wants- desires of citizens
·
Goods- Tangible commodities
Capital goods- items used in the creation of
other goods
Consumer goods- goods that are intended for
final use by the consumer.
·
Services- work that is performed for someone.
Ex. Education, concerts
·
Scarcity-the most fundamental economic problem that all
societies face
How to satisfy unlimited wants with limited
resources
· Shortage- quantity
demanded is greater than quantity supplied.
·
Factors of production- resources required to produce goods and
services.
1.
Land- natural resources
2.
Labor- work force
3.
Capital- human capital/ physical capital
4.
Entrepreneurship- innovation/ risk taken
Jan. 6. 2016
·
Capital:
·
Physical capital- tools, machines, factories,
robot
·
Human Capital- knowledge, skills, abilities, and
talents that are gained through education and work experience.
·
Trade offs- Alternatives that we give up when we
choose one course of action over another.
·
Opportunity costs- the next best alternative
·
Production possibility graphs (PPG)- shows alternative ways to
use an economy’s resources.
·
4 assumptions of a (PPG)
1.
Two goods
2.
Fixed resources (Land, capital, ent., labor)
3.
Fixed technology
4.
Full employment of resources
·
Efficiency- using resources in such a way as to
maximize the production of goods and services.
·
Allocative efficiency- the products being
produced are the ones most desired by society
·
Productive efficiency- products are being
produced in the least costly way and this is any point on the production
possibility curve.
·
Underutilization- using fewer resources than an
economy is capable of using.
· 3 types of movement that occur
within the PPC
1.
Inside of the curve- it occurs when resources
are unemployed or under employed
2.
Along the PPC
3.
Shifts of the PPC
Jan. 7, 2016
·
What causes the PPC/PPF to shift?
1.
Technological changes
2.
Economic growth
3.
Change (delta) in resources
4.
Change (delta) in the labor force
5.
Natural disasters/war/famine
6.
More education & training (human capital)
· Inside the curve--> attainable but inefficient/ Underutilization
· On the curve--> Attainable and efficient
· Outside the curve-->unattainable
Jan. 14, 2016
·
Elasticity of demand-
A measure of
how consumers react to change in price.
·
Elastic Demand- Demand that is very sensitive to
a change in price.
1.
Always greater than 1
2.
The product is not a necessity
3. The
product
·
Inelastic demand- a demand that is not very
sensitive to a change in price
·
Less than 1
1.
The product is a necessity
2.
There are few or no substitutes
3.
People will buy no matter what
·
Unitary Demand is always equal to one.
Elastic
|
Inelastic
|
Soda
|
Gas
|
Steaks
|
Salt
|
Candy
|
Milk
|
Candy
|
Insulin/
Medicine
|
Fur Coat
|
Toothpaste
|
·
Price elasticity of demand (PED)
Step 1: Quantity- Take new quantity- old
quantity/ Old quantity
Step 2: Price- New Price- old price/ old
price
Step 3: %Din
quantity demand/ %Din
price= PED (absolute value)
PT. 2
·
Total Revenue- the total amount of money a firm
receives from selling goods and services.
PxQ= TR
·
Fixed Cost- a cost that doesn’t change no matter
how much is being produced. Ex. Rent, Mortgage, Insurance, salaries
·
Variable cost- a cost that rises or falls
depending upon how much is produced.
·
Marginal cost- The cost of producing one more
unit of a good.
Formulas:
TFC+ TVC= TC
AFC+ AVC= ATC
TFC/Q=AFC
TVC/Q= AVC
TC/Q= ATC
TFC= AFCxQ
TVC= AVCxQ
MC= NEW TC- OLD TC
