Microecon Lecture 1 - Notes .docx - Microeconomics Chapter 1 2 Economic issues and concepts Opportunity Costs Explicit Accounting costs Implicit Should

Microecon Lecture 1 - Notes .docx - Microeconomics Chapter...

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Microeconomics Chapter 1 & 2 : Economic issues and concepts, Opportunity Costs Explicit: Accounting costs Implicit: Should food and transportation count as cost of your degree? No b.c it doesn’t affect whether you go school or not. Yes or no depending on situation ( e.g moving for school) Fig. 1-1 : ½ is the opportunity cost of pizza. Slope does not change because the price of pizza and beer is constant. Fig 1-2: the production possibilities boundary becomes steeper. When resources are limited, the more of something you produce, you must sacrifice another cost. Point e and f are not possible because you cannot get with the current resources. Point d: inefficient. you are not maximizing production. Which point is better, A, B, C: A, Efficient, Maximized production Opportunity cost includes everything: What you have to give up. Normative Statement: Subjective, cannot be evaluated based on facts. Depends on value judgements, opinions (cannot be proved right or wrong). Positive Statements: cannot be proved right or wrong. Statements based on facts. Scarcity: not enough resources are available to produce all the goods and services that people would like to consume Lecture 2 Chapter 3 – Demand, Supply and Price Quantity Demand: The amount of good or service that consumers want to purchase during some time period. - Desired quantity that consumers wishes to buy at some specific price Quantity bought/purchased: actual purchases Flows Vs Stocks Flow: per unit of time, amount of income earned (per year, per month, per hour e.g water flow per unit time
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Stocks: a point in time, can be measured (e.g volume of water in a tub), amount of money in the bank account Demand Schedules and Demand Curves Demand Schedules: table showing the relationship between quantity demanded and the price of a commodity Demand Curves: Graphical Represents the relationship between quantity demanded and the price. Its negative slope indicates that quantity demanded increases when price decreases - Shifts rightward: each price corresponds to a higher quantity than it did before - Shifts Leftward: each price corresponds to a lower quantity than it did before Increase quantity Demanded: can results from a shift in the demand curve with a price constant - Increase in demand causes an increase in quantity demanded at the initial price Rise in price causes movement upward and to the left = demands fall 6 important factors that influences the total amount of some product that consumers want to buy 1) Product’s own price 2) Consumer’s income 3) Prices of other products 4) Tastes 5) Population 6) Significant changes in weather Consumer’s Income Normal goods: increase in demand quantity when income rises (chicken): Demand curve shifts to the right Inferior goods: decrease in demand quantity when income falls (potatoes): demand curve shifts to the left Prices of other goods Substitutes in consumption: Goods that can be used in place of another good to satisfy similar needs or desire
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