CLEP Microeconomic Notes 1 - Basic Economics 1 Economics the social science that focuses on the usage of resources 2 Microeconomics branch of economics

CLEP Microeconomic Notes 1 - Basic Economics 1 Economics...

This preview shows page 1 - 3 out of 16 pages.

Basic Economics 1)Economics – the social science that focuses on the usage of resources2)Microeconomics – branch of economics that studies use of resources by individuals, households, firms and industries3)Macroeconomics – study of the national economy4)Production Possibility Curve (PPC) – opportunity costs associated with two goodsa)Inefficient and unemployed resources – operating inside the PPCb)Outward shift indicates economic growth5)Economic Resources & payments a)Land – all natural resources (raw materials) – PAYMENT = RENTa.i) Ex: beach, crude oil, timber, oceans, mineral depositsb)Capital – equipment and machinery (used to create goods) – PAYMENT = INTERESTb.i)Ex: computers, buildings, assembly line machineryc)Labor – intellectual and manual human attributes (human resources) – PAYMENT = WAGESd)Entrepreneurship – PAYMENT = PROFITS6)Rent – the money one pays to use someone’s land 7)Interest – the money one pays to use someone’s capital8)Opportunity Costs – are forgone or missed opportunities, tradeoffs, what one gives up to purse the next best alternative9)Opportunity Costa.i) ButterMilk (a.i.1)010(a.i.2)105(a.i.3)200a.ii)To determine opportunity cost divide 10 lbs of butter by 5 gal of Milk = 210) Opportunity Costs – found by adding explicit costs and implicit costsa)Explicit cost – you have to pay for access to the system (money well spent)b)Implicit – you have to spend time studying (time well spent) 11) Absolute Advantage – produce more of a good than another12) Comparative Advantage – produce a good at a lower opportunity cost13) Normative economics – based on the way someone believes “Things ought to be” - opinions not facts14) Positive Economics – states facts based on empirical evidence, forms a hypothesis and tests it using scientific evidence15) Command Economy – the government dictates production and consumption16) Free Market Economic System – aka Capitalism – supply and demand determine price of goods17) Mixed Market Economic system - blends free market (capitalism) with the government run (command system) 18) Adam Smith – Scottish economist - father of modern economics, wrote The Wealth of Nations in 1776Supply and Demand19) Law of Demanda)Increase in Price (P) = decrease in quantity (Q) demandedb)Decrease in Price (P) = increase in quantity (Q) demandedb.i)Demand is the relationship between the amount of goods that a consumer is willing and able to buy at the price b.ii)Inverse relationship between price and quantity
Background image
20) When demand decreases: market equilibrium price and quantity decreases21) Relative Price – the price of one product expressed in terms of anther producta)Calculate relative price by dividing one by the othera.i) An iPod is $100, Tv is $500 the Tv is 5 ipodsa.ii)$10 movie ticket and $100 NBA ticket = relative price of NBA ticket is 10 movie tickets22) Externality – is the impact (cost or benefit) of a transaction on a party that is not directly involved in the transactions
Background image
Image of page 3

You've reached the end of your free preview.

Want to read all 16 pages?

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes