Microeconomics - ECONOMICS= The study of how...

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. ECONOMICS= The study of how scarceresources are allocuted smong competing uses. . KEY ECONOMIC QUESTIONS INCLUDE: 1. WHAT is produced? 2. HOW is it produced? 3. WHO getswhat is produced? . PRODUCTION POSSIBILIW FRONTIER: The ulternative combinations of linal goods und senices that c'ould be produced in a given time period with all qvailable ancl fimited resources and technolog;. L lllustrates opportunity cost - obtaining more production of one good requires a reduction in the production (lostoppor- tunitv) of one or more othersoods. 2, Lawof increasing opportunity cost - obtaining more of a good in equal amounts requires giving up ever larger amounts of the alternative eood. 3. Inside frontier - unemploled resoruces or resources used inefficiently. 4. Expanding frontier - occurs (a) when resources are increased and/or (b) due to technological advancements. . HOW CHOICES ARE MADE: L Market mechanism - supply and demand determine the price; owners allocate resources to obtain the highest mon- etary rewards. 2. Command economy - central authority determines the pnce and allocates resources to achieve goals. 3. Mixed - an economy that uses both market andnon-market signals to allocate goods andresources. . MACROECONOMICS= The study of economic qggre- gates such as national production and the price leveL . M|CROECONOMICS: The study of the behavior of consumers and producers operating in the individual murkets of the economy. . DEMAND CURVE (SCHEDULE;: A curve (table) showing the quantities of a good a consumer is willins and ableto buv at alternative Dnces. . LAW OF DEMAND: Inciease in price' (P) cuuses decreusein quantity (Q) demunded . CHANGE lN QUANTITY DEMANDED: (Movement along the demand curve) Caused by a change of price of the given good. . CHANGE lN DEMAND: (Shift in the entire demand curve) Results fiom changes in tastes,income, personal taxes, prices of related goods (substitutes or complements), expected price or quantiry number of buyers, or a change in plannedconsumption at all pnces. . SUPPLY CURVE (SCHEDULE): A curwe (table)show- ing the quantities of a gooda seller is u'illing andable to sell at altemative prices at a given cost of produchon. . LAW OF SUPPLY: Increase in price (P) causes increuse in quantity (Q) supplied . CHANGE lN QUANTITY SUPPLIED: (Movement along the lupply curve) Caused by a change ofprice ofthe lllven gooo. . enruicg lN SUPPLY: (Shift in the entire supply curve) Results ffom change in the cost of production. business taxes, expected pnce or quantrty, change rn the price ofother produced goods, change in the number of sellers, change in plannedsales at all pnces, and change Ln technology. R ES P O NS IVE N ESS OF' Q UA NTTTY DEMAAIDED TO A CHANGE II'I PRICE S|MPLE FORMULA:. Theubsoltrte vulue of '% c'hunge in quantitt: demanded + o)i change in price. MIDPOINTS FORMI II ^. 94:':*1 ttn' Q+Q Pr-4 TYPES OF ELASTICITY (e ): E L A s r l c . . . . | e l > 1 UNITARY ELASTIC . . .lel = 1 l N E L A s T l c . . . | e l < 1 STRAIGHT LINE DEMAND CURVES: Are elastic at prices above the midpoint and inelastic at prices below it. Comparing two curves on the same graph, the flatter curve is moreelastic at everv orice.
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