AS THE PRICE OF GOODS AND SERVICES FALLS, THE QD INCREASES; AS THE PRICE RISES, QD DECREASES.

BUS 400

Ch 1

Factors of Production and their earnings;

Factors- Land, Labour, Capital, Enterpreneurship.

Earnings- Rent, Wages and salaries, Interest and devidence, Profits.

Parts of model:

Definitions, Assumptions, Hypotheses, Predictions.

Positive economics- explain of describe how the economy works.

Normative economics- explain how economy should work.

Endogenous variable- a variable whose value is determined within a given model.

Exogenous variable- a variable whose value is determined by factors outside a given model.

CH2

Oportunity cost- the next- best alternative that is sacrificed when a choice is made.

= (What we give up/ What we get)

Scarcity-(forces)- Choice = Opportunity cost.

Cost Benefit approach- an analysis in decision making that involves the comparison of costs and benefits.

Production possibility schedule (P-P)- a table showing various combinations of goods and services that can be produced with full utilization of all resources and a given state of technology.

Production possibilities curve(p-p)- a graph showing all combinations of goods and services that can be produced if all resources are fully employed and technology is constant.

Law of increasing opportunity cost- the phenomenon of increasing unit cost as an economy increases its production of a commodity.

A CONCAVE PRODCUTION POSSIBILITY CURVE ILLUSTRATE INCREASING OPPORTUNITY COST.

Productive efficiency- the situation that exists when an economy cannot increase its production of one commodity without reducing its production of some other commodity.

Productive inefficiency- the situation that exists when it is possible to produce more of one commodity without producing less of some other commodity.

AN INCREASE IN THE QUANTITY OR QUALITY OF RESOURCES OR AN INCREASE IN TECHNOLOGY SHIFTS THE P-P CURVE OUTWARD.

Circular flow- an economic model that shows the flow of resoucres goods and income between sectors of the economy.

CH3

DEMAND

Demand – the various quantities of a good or services that people are willing and able to buy at prices during a specific period.

Demand schedule- a table showing the inverse relationship between price and quantity demanded.

Quantity demanded- the quatity that people will be willing and able to buy at a specific price.

AS THE PRICE OF GOODS AND SERVICES FALLS, THE QD INCREASES; AS THE PRICE RISES, QD DECREASES.

3 explanation that effects the price goes up and qd goes down:

Market- Size Effect- caused by a change in the number of buyers in the market as a result of a change in price.

Real income effect- purchasing power.

Substitution effect- people switching to or from a product as its price changes.

Demand curve- a downward- sloping curve showing the inverse realationship between price and quantity demanded.

MAIN FACTORS THAT AFFECT THE DEMAND :

INCOME

PRICE OF RELATIVE GOODS

TASTES AND PREFERENCES

EXPECTATIONS

POPULATION

Normal goods- demand increases as income increases and for which demand falls as income falls.(blue ray movies, laptop, computers and vacation pachages).

Inferior goods- demand increases income falls, demand decreases income increases.(macaroni and cheese( instead of reastaurant dinner), beans(instead of meat), used clothing (instead of new clothes)).

Substitude-good that can be used in place on another. (Lemon and lime, sugar and honey, butter and margarine, tea and coffe)

Complements- goods that are consume (used) together. (auto and gasoline, computers and flash drives, coffe and cream)

Demand shifters- non price determinants that shift the demand curve.

THE FACTORS THAT SHIFT DEMAND CURVE(DEMAND SHIFTERS)

RIGHT:

Income rices(normal good), price of complement falls, increase in preference, price rise expected, increase in population.

LEFT:

Income rices (inferior goods), price of substitute falls, Fall in income expected.

SUPPLY

Supply- the various quantities of a good or services that sellers are willing and able to offer for sale at various prices during a specific period.

Supply schedule- a table showing the direct relationship between price and quantity supplied.

Law of supply- direct relationship among price and qs

Supply curve- an upward- sloping curve showing the direct relationship between price and QS.

Date: 2016-03-03; view: 724