Economics

Economics

Money, business, stock, finance, supply and demand, wages etc.

Macro vs Micro

Macro
Studies the economy as a whole (looking at the big picture) inflation, international trade and wages.

Micro
The study of individual or specific unit of the economy. Supply and demand, market structure and business organizations.

Positive vs Normative economics.

Positive economics.
Attempts to define the world as is, very descriptive

Normative Economics
Attempts to prescribe how the world should be (opinion based).

Needs vs Wants

Needs
Basic requirement for survival. Water, food, shelter and clothing)

Wants
Desire of citizens

Goods
Tangible commodities. Capital goods and consumer goods

Capital Goods
Item 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

Scarcity vs Shortage

Scarcity
Fundamental Economic problem that all society face. How to satisfy  unlimited wants with limited resources

Shortage
Quantity demanded 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 

Physical Capital( tools machine robots)
Human capital ( knowledge abilities and talent) gained through education and work experience

    

     4. Entrepreneurship

Trade off
Alternatives That we give up when we choose one course of action over the other

Opportunity cost
Next best alternative

4 assumptions of a PPG

1. Two goods 
2. Fixed resources ( land capital labor entrepreneurship)
3. Fixed Technology
4. Full employment of resources 

Efficiency- using resources in such a way as to maximize then production of goods and service

Allocated efficiency- Product being produced are the ones most desired by the society

Productive Efficiency- this is where products are being produced in the least costly way and it's any point on the Production Possibility Curve

Underutilization - Using fewer resources than an economy is capable of using






A ( inside the curve )

1. Attainable but inefficient 
2. Underutilization 

B and C

1. Attainable and efficient 

D( outside the curve )

1. Unattainable 

3 types of movement the occur in the PPC

1. Inside of the curve -occurs when resources are unemployed or underemployed. 
2. Along the PPC- can move form b to c or c to b 
3. Shifts of the PPC- shift out or in 

What causes the PPC AND PPF to shift

1. Technological changes 
2. Economic Growth 
3. Change in resources 
4. Change in labor force 
5. Natural disasters/war/famine 
6. Education, training (human capital)

Elasticity of demand 

Measure how consumers react to the change of price

• Elastic demand - demand that is very sensitive to a change in price. Always grater than one. A. The product is not a necessity. B. There are available substitute. 

• Inelastic demand -Demand that's not very sensitive to a change in price. Product is a necessity. Few or no substitute. People will buy no matter what. 

• Unitary demand- always equal to one 

Elastic 

1. Soda 
2. Candy
3. Fur coats 
4. Steak 

Inelastic

1. Gas
2. Salt 
3. Milk 
4. Insulin 
5. Toothpaste 

Price elasticity of demand (PED)

1. Quantity - new quantity minus the old quantity over the old quantity 
2. Price - new price - old price over old price 
3. Percentage change in quantity demanded over percentage change in price 

TOTAL REVENUE
Total amount of money a firm recessives form Selling goods and services. Formulae.  Price X revenue

Fixed cost
a cost that does not change no matter how much Is produced. Ex Rent, mortgages, insurance and salaries

Variable cost
A cost that rises outcomes depending upon how much is produced

Marginal Cost.
The cost of producing one more unit of a good

Peak 
the hugest point of real GDP greatest amount of spending and lowest amount of unemployment. In this phase inflation becomes a problem

Expansion / recovery stage
Real GDP is increasing due to an increase in spending and a decrease in unemployment

Contraction/recession
Real GDP declines for 6 months due to a reduction in spending and increasing unemployment

Trough 
Lowest point of real GDP least amount of spending and highest unemployment