Business cycle 1/22/16

Peak-Highest point of real GDP -has the lowest unemployment and the greatest spending

Expansion-(recover phase) real GDP is increasing -causes spending to increase and unemployment to decrease

Contraction-(Recession) real GDP declines for six months -increase in unemployment reduction in spending

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

Supply and Demand 1/15/16

Demand is - the quantities that people are willing and able to buy at various prices.

The Law of Demand: there's an inverse relationship between price and quantity demanded

What Causes a change in quantity demanded: Δ  in price

What causes a change in demand?

1. Δ in buyer's taste (ads)
2. Δ  in # of buyers (population)
3. Δ in income (normal/inferior goods)
4. Δ in price of related goods (complementary/substitute)
5. Δ in expectations

Supply is  the quantities that producers/sellers willing to produce at various price

The Law of Supply: there is a direct relationship between price and quantity supply

Causes a change in quantity supplied: Δ in price

What causes a change in supply? 

1. Δ in technology
2. Δ in weather
3. Δ in cost of production (resources,wages)
4. Δ in # of sellers
5. Δ in taxes or subsidies 
6. Δ in expectations

Price of elasticity 1/12/16

Elasticity of demand-Measure of how consumers react to a change in price -(taking a stab at things)

Elastic demand-demand that is very sensitive to a change in price E>1 the product is not a necessity, and their are available substitutes (cookies)

InElastic demand-Is not very sensitive to a change in price E<1 the product is a necessity, their are few to no substitutes, people will buy no matter what (water)

Unit/Unitary elastic-E=1

Formula's

TFC + TVC = TC

AFC + AVC = ATC

TFC/Q = AFC

TVC/Q = AVC

TC/Q = ATC

TFC = AFC x Q

TVC = AVC x Q

MC = new TC - old TC

Price of Elasticity of Demand (PED)

Step 1: Quantity

New Quantity-Old Quantity/old quantity

Step 2: Price

New Price- Old Price/ old price

Step 3: PED

% Δ  in quantity demanded/ %Δ in price = PED

Total Revenue-Total amount of  money a firm receives from selling goods and services 

TR=PxQ

Fixed Cost-a cost that does not change no matter, how much is 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

MAY THE FORCE BE WITH YOU

Production 1/6/16

Production Possibilities Curve/Graph (PPC/PPG)

• Trade-offs: alternative that we give up when we choose one course of action over another
• Opportunity-cost: next best alternative
• Efficientcy: using resources in such a way as to maximize production of goods and services
• Allocative Efficiency: products being produced are the ones that are most desired by society
• Productive Efficiency: products being produced in the least costly way. (any point on the production possibility curve)
• Underutilization: using fewer resources than an economy is capable of using

Production Possibilities Curve: shows alternative ways to use economy's resources

  

(4) Assumptions:

• Two goods
• Fixed resources
• Fixed technology
• Full employment of resources

3 Types of Movement Occur within PPC

Inside PPC: resources unemployed, resources underemployed, and/or productive efficientcy. attainable, INEFFICIENT

Along PPC: attainable, but EFFICIENT

Shifts of the PPC: when resources and technology change

What causes the PPC/PPG to shift?

• technology change
• change in resources
• change in labor force
• economic growth
• national disasters/war/famine
• more education or training

MAY THE FORCE BE WITH YOU 

Unit 1 Intro to Economics 1/4/16

Macroeconomics                                  

:is the study of the economy as a whole   

-international trade                                                           

-market structure 

-supply and demand       

  vs

Microeconomics  

:is the study of individual or  specific units of the economy 

- business organizations 

-minimum wage 

Positive economics

-Attempts to explain the world as is    

 -"what is"

-collects and presents facts 

 vs           

Normative economics 

  -attempts to prescribe how the world should be