Key points

Key points - H.W. 1 KEY POINTS This assignment deals with...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
H.W. 1 KEY POINTS This assignment deals with the basic issues of economics and macroeconomics. There is a lot of detail in the assigned chapters, particularly in chapter 4. We are just focusing on introducing a lot of the terms and concepts at this stage, so don’t get bogged down. After doing the chapter readings you should understand the following: • The definitions of economics, microeconomics and macroeconomics • The what, how, who questions and the invisible hand and how markets answer these questions • Marginal and Opportunity cost • Economic Methodology • How to read and sketch simple graphs and how to interpret slopes • What firms, markets, property rights, money are and how they are involved in the economy • The basic issues that macroeconomics deals with (note that we will do less than is in the text at this point): o Determinants of output, unemployment, inflation, fiscal and monetary policy and economic growth o Difference between short-run and long-run macro o The Keynesian and Classical approaches o Know a bit about the great depression H.W. 2 KEY POINTS: • Importance of the concept of the invisible hand – basis for belief in ‘free-market’ capitalism in which individual self-interest (greed), coming together in a competitive market place, leads to an socially efficient outcome as though ‘guided by the invisible hand of providence’ o Note – this indicates that market economies are efficient but not necessarily equitable (fair) • Measuring and determining the value of anything – by its market price determined by supply (reflecting costs and scarcity) and demand (reflecting tastes). • Capitalism versus Socialism – individual and market determined outcomes versus government planning. • Supply and Demand - Micro o Changes in quantity demanded (which is a movement along a given demand curve) versus change in demand (which is a shift in the whole curve) Demand refers to the whole relation between price and the quantities people would be willing and able to buy – the whole curve. A change in demand means the whole curve shifts, due to a change in income, tastes, or the prices of other relevant goods (substitutes or complements). • Don’t worry about normal and inferior goods much, nor about complements and substitutes Quantity Demanded refers to a specific quantity that people would be willing and able to buy at a given price – a point on a given demand curve. A change in the quantity demanded is caused ONLY by a change in price (which can only be caused by a shift in SUPPLY)
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The same definitions hold for Supply and quantity supplied, except that the Supply curve shifts (a change in supply) when costs of production change. o Meaning and determination of equilibrium – market equilibrium occurs where the D curve
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 17

Key points - H.W. 1 KEY POINTS This assignment deals with...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online