ELASTICITY AND ITS APPLICATION
Elasticity: a measure of how responsive quantity demanded/supplied is to
one of its determinants
What determines price elasticity of demand?
Necessities versus luxuries
Availability of a close substitute
Definition of the ma
Fundamental cause of a monopoly is barriers to entry which arise
o A key resource being owned by a single firm
o The government gives a single firm the exclusive rights to
produce some good or service
o The costs of produc
THINKING LIKE AN ECONOMIST
Positive statements: claims that attempt to describe the world as it is
Normative: claims that
attempt to claim the world as it
Externality: arises when a person engages in an activity, which influences
the well-being of the bystander and yet neither pays nor receives
compensation for that effect.
Internalizing and externality: altering incentives so that peop
SUPPLY, DEMAND , AND GOVERNMENT POLICIES
Price ceiling: legal maximum, price is not allowed to rise above this
point. It is binding if it is below the equilibrium price. This will result in
a shortage. Leads to discrimination in allocating scarce goods to
THE MARKET FORCES OF SUPPLY AND DEMAND
Market: a group of buyers and sellers of a particular good or service
Competitive market: many buyers and sellers so that each has a negligible
impact on price
What determines quantity demanded?
o Law of demand
PRINCIPLES OF ECONOMICS
Economy: one who manages household
Scarcity: means that society had limited resources and therefore
cannot produce all the goods and services people wish to have.
Economics: the study of how society manages its scarce resources
FIRMS IN COMPETITIVE MARKETS
Competitive market- price takers
1) There are many buyers and sellers
2) The goods offered are largely the same
3) Firms can freely enter/exit
5) Profit maximization occurs where P=MC or MR=MC
6) Firms MC curve dete
CONSUMERS , PRODUCERS AND THE EFFICIENCY OF THE MARKET
Welfare economics: the study of how the allocation of
Each buyers maximum is his
or her willingness to pay
Consumer surplus: buyers
willingness to pay minus the
Is oligopolys profit a social cost?
o No, transfer of consumer surplus to producer surplus does
not affect total surplus it is not an economists job to
decide whether or not producers are less deserving of this
o Exception: if to maintain a mono
(1) Qualia- the brains representation of both the external world and the
bodys internal state.
(2) Consciousness theorists call these properties qualia the taste of
red wine, the look of lightning shimmering on water, the feeling of sudden
Central Nervous System brain/spinal cord
Peripheral Nervous System somatic and autonomic
(sympathetic fight or flight/parasympathetic rest and
Cerebral cortex: outermost layer of cerebrum, composed of gray matter,
receives and pr
Encoding - The processing of information into the memory system
Ex) I remembered that I had honey-nut cheerios for breakfast this
morning even though I did not try to consciously remember it.
Effortful Processing Encoding that requires conscious ef
Ex: (1) Adrenaline the fight or flight hormone produced by the adrenal
glands in stressful situations. The hormone makes the heart beat faster
and the body sweat.
(2) I had a tendency to crack jokes compulsively in certain social
Neurotransmitters (Chemical messengers): chemicals that regulate
mental performance, emotions, and pain response
Acetylcholine: involved in cognitive functions, especially memory
major neurotransmitter of the parasympathetic system and
(1) Oxytocin- a molecule that plays an essential role in some of lifes
most profound events: falling in love, forming strong social attachments,
having a baby. This is released during life experiences that involve intense
emotional attachment: childbirth
(2) We now believe that this increased connectivity enable women to do a
better job than men at reconciling the sometimes conflicting interpretations
offered up by each hemisphere.
(3) p. 29
(1) Amygdala- part of the limbic system of the brain that plays
Brain Stem: lower extension of brain where it connects to the spinal cord,
contains cranial nerves, called reptilian brain, from primal survival instincts
Midbrain nerve pathways, auditory and visual reflex centers (pupil reflex
An anxiety disorder characterized by haunting memories,
nightmares, social withdrawal, jumpy anxiety, and/or insomnia that
lingers for four weeks or more
Some of the most common obsessions are fear of contamination or
a serious illness, fixation on l
Anxiety disorder characterized by unwanted repetitive thoughts
(obsessions) and/ or unwanted and repetitive actions (compulsions).
More common among teens and young adults.
Affects about 3% of the US population.
OCD is as an anxiety d