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Unformatted text preview: . ECONOMICS= The study of how scarce resources are allocuted smong competing uses. . KEY ECONOMIC QUESTIONS INCLUDE: 1. WHAT is produced? 2. HOW is it produced? 3. WHO gets what 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 (lost oppor- tunitv) of one or more other soods. 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 and non-market signals to allocate goods and resources. . 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 able to buv at alternative Dnces. . LAW OF DEMAND: Inciease in price' (P) cuuses decreuse in 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 planned consumption at all pnces. . SUPPLY CURVE (SCHEDULE): A curwe (table)show- ing the quantities of a good a seller is u'illing and able 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 planned sales at all pnces, and change Ln technology. R E S P O NS IVE N ESS OF' Q UA NTTTY DEMAAIDED TO A CHANGE II'I PRICE S|MPLE FORMULA:. The ubsoltrte vulue of '% c'hunge in quantitt: demanded + o)i change in price....
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This note was uploaded on 02/01/2009 for the course ACTG 6610 taught by Professor Ward during the Spring '09 term at Middle Tennessee State University.
- Spring '09