Economics - Economics the study of Scarcity unlimited want...

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1 Economics: the study of... Scarcity : unlimited want vs. limited things to go around. => People have to make a choice; the right or wrong choice. Study how people make choices. More income = more choices. Cost vs. benefit analysis. Weigh your choices; should I or shouldn’t I. Cost > benefit = I’m out. Benefit > cost = make choice. 3 Groups of People (faced with analysis): 1) Consumers: purchasers of products (item that’s been manufacture) and resources (help with manufacturing products) – utility rationality. 2) Producers: manufacture products – maximize profit = total revenue: huge, total cost: small. 3) Government: goal is constantly changing. No constraint. Rationality : (a constraint to deal only with rational consumers and producers) you set a goal, then you work towards achieving the goal. => utility maximizers Resources : two ways: 1) means of production. 2) source of income. 3 Basic Resources : 1) Land: the ground itself; extracted or grown from the ground. 2) Labor: human means of production. 3) “Kapitol”: non-human means of production. (ex) Machinery, computers, buildings (land capitol). Ceteris Paribus- Independent Variable : actor. (On vertical) Dependent Variable : reactor. (On horizontal) **Quadrant one = positive numbers.
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Value : how much a consumer is willing to pay for a product. Market : interaction between consumers and producers. y=mx+b P= price Q= quantity Consumers => demanders Demand : consumer wants, needs, and gotta haves constrained by their level of income. (No power to demand a product if no income) Producers => suppliers Supply : a finished product (ready to be sold) constrained by amount of resources producer owns. Quantity Demand : (QD) the amount of a product a consumer can purchase, at a given price, ceteris paribus. => price specific topic. Law of Demand : Increase in P => decrease in QD. Decrease in P => increase in QD. Quantity Supply : (QS) the amount of a product a producer is willing to sell at a given price. Law of Supply : Increase in P => increase in QS. Decrease in P => decrease in QS. Quantity Demand => one price. (One point on demand curve) Demand => all the prices. Indirect relationship (btwn price and quantity) => downward slope. Direct relationship => rising slope. Equilibrium : the point of intersect; quantity demanded = quantity supplied. => no shortage or surplus. (price is mutually agreed upon) Two Things: 1) Supply and demand 2) Quantity supply and quantity demand.
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Shortage : quantity supply < quantity demand => prices increase. Surplus : quantity demand < quantity supply => reduce prices. Costs : Two Types: 1) Accounting cost –> explicit. (layout, detailed in front of you) 2) Economic cost –> explicit and implicit (opportunity = a measure of the next best use of a resource) costs.
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