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AU / Business / BUS 2020 / what is the social science concerned with how Individuals, institution

what is the social science concerned with how Individuals, institution

what is the social science concerned with how Individuals, institution

Description

School: Auburn University
Department: Business
Course: Principles of Economics: Microeconomics
Professor: William finck
Term: Spring 2016
Tags:
Cost: 25
Name: Week 1/15 - 1/22 Notes
Description: These notes cover everything that Dr. Finck has taught in his slides since the beginning of the semester :)
Uploaded: 01/22/2016
10 Pages 15 Views 9 Unlocks
Reviews

Becky Falgoust (Rating: )

really helpful and straightforward!!!



Econ 2020 – Exam 1 Lecture 1 definition formula relationships between variables


what is the social science concerned with how Individuals, institutions and society make optimal choices under conditions of Scarcity?



∙ Chapters 1 & 2

∙ Intro to econ

o What are we studying? Choices

o Economics- the social science concerned with how  individuals, institutions and society make optimal  choices under conditions of scarcity

o Scarcity- the condition whereby the resources we use to produce goods and services are limited relative to our  wants for them

o Scarce good- economic good = good for which you can  NOT get all you want at zero COST  

 Cost- *not price

o Free good- opposite of scarce; you can get all you want  at zero COST

 Someone paid for the ink for junk mail = not free   Ex: air

o Price vs. Cost

 NOT the same thing

 Price- signal that tells producers what and how  much to produce; in a standard market transaction it is paid by the consumer


what is scarcity?



∙ Ex: price tag

 Cost- the sacrifice associated with making a  

choice; in a standard market transaction it is paid  by the producer

∙ Ex: what it took to make the shirt (money,  

labor, tools, ect.)

∙ Types:

o 1. Explicit cost: out of pocket, monetary  

payments

 nothing paid when walking in the  Don't forget about the age old question of infancy and early childhood development paper

door for class; just cost time to get  

here

o 2. Implicit/opportunity cost***- most  

valued option forgone (what you gave  

up)

 now that I’m doing this, I can’t do  

something else (eating, sleeping,  

working, ect.)

 in order of most value- number one

is opportunity cost

o 3. Economic cost- explicit + implicit

∙ Economic cost of Attending Auburn

o Explicit costs:

 Tuition- $41,696

 Books- $4,800

o Opportunity cost:

 Full time job (with just a high  


what is the line that shows the maximum willing of consumers to pay for any amount?



school degree)- $98,176

o Economic cost:  

 $144,672

o Resources- the inputs used in the production of goods  and services; aka factors of production  If you want to learn more check out which of the following is not a fundamental quality of useful accounting information?

 Types you’ll need:  

∙ Natural- land, oil, lumber, ect.

∙ Labor- physical and mental talents used in  

production

2

∙ Capital- all manufactured goods used in  

production

o How do we make choices?

 We try to maximize our utility by using marginal*** decision making

 Utility- the satisfaction a consumer obtains from  the consumption of a good or service

 Marginal- additional; the change that results from  an additional unit

 NOTE: utility maximization by producers and  

consumers usually maximizes social welfare

o Purpose:

 To use economic principles to create models that enable us to analyze and predict behavior  Economic principles- statements about  

economic behavior or the economy that enable prediction of the probable effects of certain  

actions

[Lecture 2]

 Model- a simplified representation of how  

something works

∙ Chapter 3 – The Market Model

o Market- any institution that brings together buyers  and sellers of a particular good or service

 In product markets, households demand goods  and services firms supply in exchange for  

money

 In resource markets, firms demand resources  households supply in exchange for money

o Circular flow diagram

3

If you want to learn more check out mech 211

 Product markets:

∙ Firms provide goods and services

∙ Households provide money

 Resource markets:

∙ Households provide resources

∙ Firms provide money We also discuss several other topics like the texas constitution of 1869 was regarded by most texans and traditional historians as

o Demand schedule

 A table that shows how much of a good or  

service consumers will want to buy at various  prices

 High prices- quantity low; low prices- quantity  increases

 Law of demand (economic principle)- the price  of a good and the quantity demanded are  

inversely related

o Demand curve

 A line that shows the maximum that  

consumers are willing to pay for any quantity

price

4

Dquantiti 

ty

 Demand- the relationship between P and Qd for all possible prices

 Quantity demanded the number of units  

consumers are willing to buy at a specific price  Change in quantity demanded ( ∆Qd) 

∙ Delta- change

∙ A change in the amount purchased caused

by a change in the price; a movement  

along the curve

 Change in demand (∆D)

∙ A shift of the entire curve to the left or  

right

o Ex: income Don't forget about the age old question of if the demand for ipods is price elastic, then

 Factors that shift the demand curve

∙ 1. Income:  

5

o normal goods- income and demand  

move together  Don't forget about the age old question of com1000 uf

o inferior goods- income and demand  

move opposite

o determining the classification of a  

good is by the relationship between  

income and demand

 Test Q: given relationship  

between income and demand

how would that person classify  

that good?

[Lecture 3]

o ex: what happens to the demand for  

Sam’s Cola (an inferior good) when  

income rises?

 Demand curve shifts to left  

(orange line on change in  

demand graph)

∙ 2. Price of related goods

o substitutes- goods that take the place

of each other in consumption

o the price of one good and the  

demand for the other move together

 ex: you buy cheeseburgers  

normally. if pizza gets cheaper,  

you’ll be more likely to get pizza  

so the demand for  

cheeseburgers goes down  

o complements- goods that are used  

together in consumption

6

 ex: if I buy one, there’s a good  

change ill buy the other (French  

fries and burgers)

 the price of one good and the  

demand for the other move  

opposite  

∙ ***3 factors involved:  

change of price, change in  

demand, and the  

relationship between them

 what happens to the demand for  

peanut butter when the price of  

jelly (a complement) falls?

∙ Demand curve shifts to the  

right (purple line on change  

in demand graph)

∙ 3. Expectations of future prices

o what I expect of the good tomorrow

o expected future price changes and  

current demand move together

 ex: I will buy more before it gets  

more expensive tomorrow

∙ 4. Number of buyers

o ex: as the ‘baby boomers’ age,  

demand increases for Social Security  

(problem for government), Viagra  

(good for companies), ect.

∙ 5. Tastes and Preferences

o increase in demand that we can’t  

explain, we throw in here.

7

 Ex: Fads, trends

∙ Nikes, yoga pants,  

monograms

o Supply schedule

 Producers try to maximize profit, so there are 2 sides to profit. Money you’re bringing in & your  money minus cost.

 Lots of selling in competitive profits= can’t pick your own price. Has to be same as everybody  

else.

∙ No control, just responding to everyone  

else.

 Supply schedule- a table that shows how much  of a good or service producers will offer for sale at various prices.

∙ Law of supply- the price of a good and the  

quantity supplied are directly (positively)  

related. (one goes up, the other goes  

down)

o Ex: Selling superbowl ticket: The price

you sell it for is equal to the implicit  

cost of you not being able to go.

 Supply curve

∙ A line that shows the minimum that  

producers are willing to accept as  

payment for any quantity

∙ Quantity supplied: number. Quantity:  

curve.

∙ Supply- the relationship between P and Qs

for all possible prices

8

∙ Quantity supplied- the number of units  

producers are willing to offer for sale at a  

specific price

 Change in quantity supplied ( ∆Qs)- a change in the amount offered for sale caused by a  

change in the price; a movement along the  

curve

  change in supply ( ∆S) 

∙ a shift of the entire curve to the left or  

right

o if its good produce more(quantity up  

even if price stays same), if its bad  

produce less

∙ think about left decrease, right increase  

(in supply)

9

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