Economics 202 Yali Wang's office hours: Mon-Wed 10-11 am Thur 10-12 206 Old Botany 1. Factors of Production: Land Labor Capital Entrepreneurship 2. Opportunity Costs 3. Production Possibility Curve Chapter Three-Supply and Demand Consumers maximize t
Why do things move towards equilibrium?
If higher, excess supply (surplus), sellers will reduce price
If lower, excess demand (shortage), sellers will increase price
Analyzing changes in equilibrium
o Demand and supply are relationships betwe
Must convert to a common price to determine if real earnings have gone up.
Earnings2005 x (CPI2015 / CPI 2005)
551.33 x 237.85 / 198.10 = $661.95 New 2005 earnings . We converted 2005 dollars to 2015 dollars
Real and nominal interest rate
The cost of borr
Law of Demand
Downward sloping demand
o Implies that people will buy more of something when the price is lower and less when
the price is higher
Why does demand slope down?
o Substitution effect
o The higher the price of the IPad, the more likely you are
Slope= Change in y/ Change in X
Scientific method and economics
Science is about making hypotheses, gathering real worlds data to test them
Best way to test is controlled experiments
Applied science: does a new drug lower cholesterol? Conduct rando
Production and growth
Importance of Growth
Long-run economic growth
We are almost 8x as rich, on average, as we were in 1900!
GDP growth understates how much better off we are today we have more leisure time, cleaner
Purchasing power parody:
Inflation is an increase in the average level of prices, not a change in any specific price. The average price is determined by finding the average price of all output. A rise in the average price is called inflation. A fall in the average price is
Economics 202, Chapter 4 Market failure occurs when an imperfection in the market mechanism prevents optimal outcomes. The four specific sources of market failure are: o Public goods o Externalities o Market power o Equity A private good is a good or
Economics 202, Chapter 5 Detriments of Demand o Taste o Income o Other goods o Expectations o Technology o Factor costs o Number of sellers Measures of Output o How do we measure a nation's well-being? GDP is commonly used National-income accounting-
Economics 202, Chapter 6 Unemployment The labor force includes all persons over age sixteen who are either working for pay or actively seeking paid employment. The labor-force participation rate is the percentage of the population working or seeking
Not so well defines
Best thought of as a disequilibrium in the labor market that does not go away, or goes away vey
o Surplus, quantity supplied greater than quantity demanded
How can it get out of equilibrium?
Changes in de