Costs of Production
All firms incur costs and those costs help determine how much a
firm will produce as well as how high the price of the good or service
will be. The area of economics which deals with production and
pricing decisions firms make as well
Consumer Choice and Budget Restraints
Rational Behaviorderive the greatest satisfaction
on marginal utility
Restraintsmoney income is limited
scarcity, consumer must compromise
Utility-Maximizing RuleConsumer Equili
Push factor- a force that induces people to move out of their present
Pull factor- a force that induces people to move into a new location.
3 types of push and pull factors are:
-economic: more jobs, better pay, etc.
-cultural: forced migration
Where has the worlds population increased?
Crude birth rate- (CBR) total number of live births per every 1000
people per year.
Crude death rate- (CDR) total number of deaths per every 1000
people per year.
Natural increase rate- (NIR) % by which a populat
Site- the physical character of a place.
Situation- the location of a place relative to other places.
Meridian- (longitude) an arc drawn between the North and South
Parallel- (latitude) a circle drawn around the globe parallel to equator
Possibilism- the counter to e.d. (above), it is the belief that while
environment can limit certain actions of a people, it cannot wholly
predestine their development.
Resources- the substances found on Earth that are useful to people.
-Climate is often c
STAGE 1: pestilence and famine. Infectious and parasitic diseases are
primary causes of death. Black Plague
STAGE 2: receding pandemics; diseases spread quickly as
poor people crowd into rapidly growing industrial cities. Cholera
STAGE 3 & 4: degenerative
Distribution- the arrangement of a feature in a space.
Density- the frequency with which something occurs.
Arithmetic density- the total number of people in an area.
Physiological density- the total number of people per unit of arable
Demography- the scientific study of population characteristics.
Overpopulation- the status of not just the total number of people on
Earth, but also the relationship between the number of people and
the availability of resources.
Nearly two-thirds of the
How do geographers describe where things are?
Map- a two-dimensional model of Earths surface, or a portion of it.
Place- a specific point of Earth distinguished by a particular character.
Region- an area of Earth distinguished by a distinctive combination
Thomas Malthus proposed in his Essay on the Principle of Population
1798, that the population grows faster than the food supply.
He claimed that while population expanded at a geometric or
exponential rate, food supply increased arithmetically or
STAGE 1: Fluctuating high death and birth rates produce little growth
STAGE 2: Death rate plummets as a country enters the ag and industrial
revolutions, causing plentiful food supplies and enhanced hygiene are
dispersed to the masses. Birth rate stays re
The non-price determinants of supply are:
Changes in resource prices-most important and most typical reason for
change. The price of ingredients and other capital goods, rent or labor could
rise of all. New technology could make productions more or les
is a measure of how much buyers and sellers respond to
changes in market conditions.
allows us to analyze supply and demand with
Price elasticity of demand
is the responsiveness of consumers to a change in the price of a
Non-price determinants of demand are:
Change in Income-having more or less to spend affects individual demand
schedules. For normal goods, an increase in income leads to a rightward shift in the
demand curve. For inferior goods, an increase in income l
Not all markets are allowed to function freely. Supply and
Demand may result in prices that are unfair to buyers or to sellers.
Government may set a price and it may differ from the equilibrium
price that the market sets.
Changes in Quantity demanded: Movement along the same
demand curve caused by a change in Price!
As the price changes, the quantity demanded
assume that among the horizontal axis changes.
PRICE is the 4
A movement from $5 to $4 causes
Interpretation of E
see graphs on page 21
Inelastic Supply Quantity supplied does not respond strongly to price
changes. E is less than one.
Elastic Supply Quantity supplied responds strongly to
price. E is more than one.
A minimum legal price above equilibrium price
Supported by authority like government
Creates surplus since
the amount supplied is
greater than the amount
Examples: minimum wage, price supp
Total Revenue Test for Elasticity
Total Revenue is the amount the seller receives from the buyer
from the sale of a product; P x Q = TR
Elasticity and total revenue are related; observe the effect on total
revenue when product price changes
In 1992 people
The term business cycle refers to the recurrent ups and downs in the
level of economic activity, which extend over several years. Individual
business cycles may vary greatly in duration and intensity. All display a set
The overhead (The Busin
Growth Economics examines factors, which expand an economys
productive capacity over time.
Economic growth is defined and measured in two related
1. the increase in real GDP which occurs over a period of time
2. the increase in real GDP per capita
people must work in order to support themselves and
their dependents, governments strive to keep levels of
unemployment low and usually measure unemployment rates
The civilian labor force is defined as the sum of employed
civilians and pe
The CPI represents all goods and services purchased for
consumption by the reference population (CPI-U or CPI-W) BLS has
classified all expenditure items into more than 200 categories, arranged
into eight major groups. Major groups and examples of catego
leading indicator system
provides a basis for monitoring the tendency to move from one
phase to the next.
The system assesses the strengths and weaknesses in the economy
as clues to a quickening or slowing of future rates of economic growth,
as well as to
A person whose productive capacities are not fully used is
underemployed. A part-time worker seeking a full-time job or a skilled
worker doing unskilled work for lack of a job in his or her own trade, for
example, is underemployed. Underemployment occurs
Causes of Fluctuations range from innovation to political and
Wars can be economically very disruptive
demand for war material can drive the economy to over full
employment to be followed at wars end with an economic slowdown.
Types of Employment
Frictional arises from the normal process of turnover in the labor
market as new workers enter the market and search for work, and
existing workers quit one job to look for a better one.
Often called search unemployment and wait unempl
The basic loss of unemployment is forgone output. This is a
set of goods and services that is forever lost. The economy will be
producing inside the PPC. We measure this as the GDP Gap and
Okuns Law. Named after American economist Arthur Okun (19261980),
Full employment is less than 100% because the economy is
dynamicfrictional and structural unemployment are often inevitable.
The Full employment rate of unemployment or the Natural Rate of
Unemployment (NRU) is present when the economy is