Unit 1: Demand and supply

        1/09/17                                                          Demand and Supply  

• Demand- the quantity's that people are willing and able to buy at various prices.
• The law of demand- there is an inverse relationship between price and quantity demanded.

What causes a " change in quantity demanded"?

1. Change in number of buyers ( population)
2. Change in buyers taste ( preferences, advertisements)
3. Change in income 

- Normal goods- an increase in income causes an increase in dema
nd.
- Inferior goods- increase in income that causes a fall in demand.
     4. Change in price of related goods
- substitute good
- complementary good
     5. Change in expectation (future)

• Supply-  the quantities that producers or sellers are willing and able to produce and sell at various prices.
• The law of supply- there is a direct relationship between price and quantity supply.

What causes a " change in quantity supplied "?
                                              (Heres a link elaborating on the determinants of supply and demand)

1. Change in technology                     https://www.youtube.com/watch?v=jtypT1Ql2RY
2. Change in cost of production 
3. Change in weather
4. Change in number of sellers
5. Change taxes, subsides 
6. Change in expectations (future) 

1/12/17

Calculating Quantity and Price 

• Quantity = new quantity- old quantity/ old quantity 
• Price = new price- old price/ old price 
• Total revenue= price•quantity 

1/13/17

Calculating Supply 

• TVC+TVC=TC
• AFC+AVC=ATC
• TFC/Q=AFC
• TVC/Q=AVC
• TC/Q=ATC
• New TC-Old TC= MC

1/20/17

Excess Demand and  Excess Supply 

• Equilibrium-  Point at which the supply curve and demand curve intersect
• Excess demand-  occurs when the quantity demanded is greater than the quantity supplied (results in a shortage)
• Shortage-  when consumers can't get enough of the quantity  they desire .
• Price ceiling- this creates a shortage, it occurs when the government puts a legal limit on how high the price of a product can be. Ex: the government putting a price ceiling on flu shots 
• Excess supply -  when the quantity supply is greater than the quantity demanded creates a surplus.
• Price floor- lowest legal price a commodity can be sold at, this is usually used by the government in order to prevent prices from becoming to low . Ex: Minimum wage 

Unit 1: Production possibility graphs

1/05/17

Production Possibility Graphs

• Production possibility graphs- shows alternative ways to use an economy's resources.
• The line or "PPG" is known as the frontier or curve, when producing at the frontier efficiency occurs.
• When producing beneath the frontier under utilization occurs.

-Efficiency- using all resources such a way to maximize the production of goods and services  (increases profit)
- Under utilization using fewer resources than an economy is capable of using , this leads to a decrease in profits.

1/06/17

• Point A- attainable and efficient
• point X- attainable and inefficient (recessions and famines; this is due to unemployment and underemployment)
• Point Y- unattainable using current resources

4 Key Assumptions

1. Only 2 goods can be produced
2. Full employment of resources
3. Fixed resources (factors of production 
4. Fixed technology

3 Types of Movement Along The PPC

1. Inside of the PPC
2. Along the PPC
3. Shifts of the PPC

2 Types of Efficiency

1. Productive efficiency- products are being produced in the least costly way

-This is any point on the production possibility curve

      2. Allocative Efficiency- the products being produced are the ones most desired by society, this optimal point on the PPC depends on the desires of society.

1/11/17

Price Elasticity of Demand 

• This is the measure of how consumers react to a change in price.

1. Elastic Demand- demand that is very sensitive to a change in price. 

- product is not a necessity, substitutes.

- Ex: soda, fur coat, pizza ( E>1)

     2.  Inelastic Demand- demand not very sensitive to a change in price.

- product is a necessity, there are few or no substitutes for these. 

- Ex: gas, salt, insulin ( E<1)

     3. Unitary Elastic- If a change in price of that good causes an equal change in quantity demand.

- ( E=1) 

Unit 1: The Basic Concepts of Economics

01/3/17
Macroeconomics vs Microeconomics 
Macroeconomics- The study of the economy as a whole, in other words you are looking at "the big picture".
Microeconomics- The study of individual or specific units of the economy.

Positive economics vs normative Economics
 Positive Economics- claims that attempt to describe the world as is ( very descriptive also collects and presents facts).
Normative Economics- claims that attempt to prescribe how the world should be ( opinion based).

Needs vs Wants 
Needs- basic requirements for survival
Want- Desires

Scarcity’s vs shortages
Scarcity- fundamental economic problems that all of society faces. ( how to satisfy unlimited wants with limited resources)
Shortages- situation in which quantity  demanded is greater than quantity supply.

Goods vs services
Tangible (touch/ feel) commodities
Services- work that is performed for someone else

01/04/17

4 Factors of Production

Consumer Goods- goods that are intend to be used by the consumer 

Capital Goods- items used in the creation of other goods 

1. Land- natural resources 

2. Labor- work exerted 

3. Capital- 

• Human Capital- people acquire skills knowledge through experience and education.
• Physical Capital- money, tools, buildings,. Machines, etc.

4. Entrepreneurship- involves risk taking combines the factors of production in order to become successful.

Trade-offs-  alternative that we sacrifice when we make a decision ex: A farmer who plans tomatoes cannot plant corn in the same spot 

Opportunity Costs-  next best alternative in other words, what do you give up to get something.

Guns or Butter-  refers to trade off that the government faces when choosing whether to produce more or less military goods or  consumer goods.

Thinking at the margines-  deciding whether to add or subtract one additional unit of some resource .