Econ notes - Economics notes Scarcity: the basic economic...

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Merit goods, Y Manufactured goods , X A B C Graph 1.1 P Q D 1 D 2 D P 1 P 2 Q 1 Q 2 Graph 2.1 P Q S 1 S 2 S P 1 P 2 Q 1 Q 2 Graph 2.2 P Q S P 1 P 2 Q e Graph 2.3 D P e e P max P min Q e Graph 2.4 D P e e Q 1 Q 2 surplus shortage ceiling floor Q S tax P c P t Q t Graph 3.1 D P e S Q e Tax/unit Consumer burden Producer burden Q S P c P p Q e Graph 3.2 D P e S subsidy Q s Subsidy/unit Total subsidy P Q S P quota Q e Graph 3.3 D P e e S quota Q quota Q P 1 Q * Graph 3.4 D P * e S 1 Q 1 P 2 Q 2 S 2 Output Variable factors Graph 4.1 MP AP P Q Graph 4.2 MC ATC AVC AFC Graph 5.1 P Q Graph 6.1 P AR=MR=D TR Q TR Graph 6.2 P Q Graph 6.3 PED=1 AR= D MR PED=0 PED= TR Q TR Graph 6.4 Q TR MAX TR Max P Q Graph 6.5 P AR=MR=D MC Q Profit max MR Graph 7.6 Graph 7.7 Graph 7.8 Graph 7.9 Diagram 8.2 Graph 8.1 Graph 8.2 Graph 8.4 Graph 8.3 Graph 8.5 Graph 9.1 Graph 10.1 Graph 0.2 Graph 10.3 Graph 10.5 Graph 10.6 Economics notes Scarcity : the basic economic problem all countries face it due to tradeoffs (nukes vs. healthcare, clean water vs. vaccinations) o Having to use finite resources to fulfil unlimited wants and needs 3 basic economic questions: o What to produce? o How to produce it? o For whom to produce? Factors of production: o Land: natural resources o Labour: human resources o Capital: goods that are used to produce other goods o Enterprise: organizes the factors of production o Human capital: investment in labour: education, healthcare, etc… Economic systems: o Free trade (UK, US) o Centrally planned (Cuba, North Korea) o Traditional systems (LDCs: barter, gifts, communal systems) Most economies these days are mixed economies Opportunity cost : the cost of the next best thing forgone o For economic goods, cost is always involved in choice (even if there is no price) Ex.: No such thing as a free lunch Production possibilities frontier (PPF) Shows a combination of two goods/services that can be produced efficiently with a given set of resources Graph 1.1 shows both a growing and developing economy Both production (manufactured goods) and merit goods increased 1
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Economics notes On the new larger curve: A: unemployed or underemployed resources B: fully employed resources, maximum capacity C: Unattainable, we would need to increase technology, productivity or number of resources o Thus a shift in the PPF represents an improvement in technology (robotics in industry), productivity (better management) and/or an increase in available resources (finding new natural wealth i.e.: oil, iron, etc…) economic growth o The curve of the graph is a result of the fact that the more of Y is produced, the more of X has to be given up This is known as the Law of diminishing returns Micro economics Markets: o Places where buyers (demand) and sellers (supply) meet In a free market, prices are solely determined by demand and supply Demand: Want backed by the willingness and ability to pay o All things being equal, more will be demanded at lower prices
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Econ notes - Economics notes Scarcity: the basic economic...

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