use and ownership of property that create incentive for behavior.
maximum combination of goods a country can produce. All points on PPF are
efficient. Points within are attainable but inefficient. Outside points at
unattainable. Bowed out shape reflects increased opportunity cost. Limited
resources and technology affect it. Retirement shifts it inward.
next best alternative foregone.
Law of Increasing Opportunity Cost:
as you move along PPF, the opportunity cost of additional units increases
because production gets less efficient. PPF is bowed out. Economic growth shifts
PPF outward, caused by increase in technology and resources.
expressed relative to money price of another good. If a hamburger costs $2 and
a pizza costs $4, the relative price of a pizza is 2 hamburgers and the relative
price of a hamburger is ½ a pizza.
Supply and Demand:
As price goes up,
quantity supplied goes up and quantity demanded goes down. This reflects the
law of supply and demand. Demand curves have negative slopes. Supply curves
have positive slopes.
are goods used together. An increase in
the price of one causes decrease in demand of another. Decrease in price of one
causes increase in demand for other.
are used in place of each
other. An increase in price of one good causes increase in demand for another.
If a substitute is easy to find, the good is elastic.
income causes increase in demand.
increase in income causes
decrease in demand (buses).
[Cause of changes:
: income ↑, demand ↑- income ↓, demand ↓)(
: income ↑,
demand ↓, income ↓, demand ↑)
PRICE OF RELATED GOODS
price of sub ↑, demand ↑, price of sub ↓, demand↓)(
: price of
comp ↑, demand ↓, price of comp ↓, demand ↑)
(like more, demand ↑,
like less, demand ↓)
# OF DEMANDERS
(demanders ↑, demand ↑, demanders ↓, demand ↓)
EXPECT. FUTURE PRICE
(EFP up, demand ↑, EFP ↓, demand ↓)]
[Cause of changes:
(costs ↑, supply ↓, costs ↓, supply ↑)
(tech advance, supply ↑, tech retreat, supply ↓)
( suppliers ↑, supply ↑, suppliers ↓, supply ↓)
(EFP ↑, supply
↓, EFP ↓, supply ↑)