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Econ 251 Ch. 1

by: #awesome Notetaker

Econ 251 Ch. 1

Marketplace > Purdue University > Econ 251 Ch 1
#awesome Notetaker
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About this Document

This is the same as the other Econ 251 chapter 1 notes, I just accidentally uploaded it twice and can't figure out how to get it off of here. sorry!!!
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This 4 page Class Notes was uploaded by #awesome Notetaker on Wednesday February 4, 2015. The Class Notes belongs to a course at Purdue University taught by a professor in Fall. Since its upload, it has received 55 views.


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Date Created: 02/04/15
Continue Ch 1 01202015 We have to make decisions because we have scarce resources Production Possibility FrontierCurvePPF Graph of the maximum output that can be produced see chart of Scott and Caroline above smtirs individual FPF ai 39m 39 dim339 F F F f inns ms slaps sf Esds s all ads Suits 3 ii 44 ism at Bath rss ms sf lath munis Characteristics of Individual PPF s 1 Always has a negative slope 2 The magnitude of the slope always reflects the marginal cost of x PPIF Essmpls 5 abs lawns juriis lssds 1 1 Julie abs Isunry39 1 julis sf snsw by larger inisrsspt laundry Ii cm Iswrn julisillsitisr slaps Ilwsr sst si s i cng laundry jssl lawns mswsd Essnsmswitts PFF Fsr Emu wide ssrl tjust lllrsttr lins its ftEt l 1 2E inssf sinss this ms st ths slsgis sig sss t n 5 f but thsylrs tsgs thsr s its nunsllinssr E2 stud it ssrrls frsln sddinn Egstt and t at bets w 3i Esmlins g I 4 m if ws slssn urns bsrthlrssrrt Esstt shsuld ds quot it lbsssuss Its lltss ths Eisnss 3 bstls srsnft glttirtg mssls l 19 slugs frsm I322 ts 35 1quot tf l 119 is 3lrrisltss ssrlss sits 39tltst39s Sssttis ssst M Emil times 2 tssltltrssrns 213 Bl b th39fll l tiiris tstsimssgs39s snly slssning tttgw we gg tg Esrglins sissrting bstnrgsms bsthtssms Gsrslirts39s quot39lrll3lr msltilng bsds sings Ssstt ssnft dis any msrs 5 is 1 Paint sf EpsstIisstignldgssnft mssrt t5 3 ts jl iffy sgtimsl thsuglhl fit 3 are infsssibls taglltjil sr39s insftiisisnt F sints it s FtF sstisfjgir quotprdustlsrt fliisisnlsgm its s ssminstisn st glsds pmducsdl ss shssply ss Silli tlt Characteristics of Economvwide PPFs 1 same as before 2 same as before 3 slope gets steeper as x increasesthe more resources you devote the Marginal costMC of x rises as x increasesit takes more y to do the same amount of x If Scott and Caroline hire 10 new employees there will be 12 different slopes getting steeper and steeper as we move on along xapproaches a concave down curve Shifts in PPF Any change in the level of resources or in productivity of resources shifts the PPF So whats the ideal point thenchapter 2 CHAPTER 2 Demand maximum quantity a consumer is willing and able to purchase at various prices 0 independent variable price P 0 dependent variable quantity demanded 0039 0 TP TQ ex Qdnumber per month you re willing to buy Pprice per box 6 O 5 2 4 4 3 6 2 8 1 10 O 12 Graph itx Qdeven though you usually want the independent on the x econ does it different y P She forced it to be linear negative slope D demand function Looking for the equ of the linepointslope form equation plug it in Qd 12 P 6 but P is our y so rearrange to get P 2 Qd 12 Price is really measuring your marginal benefit what it is worth to you the highest price you would pay for it LOts of different variables though on a diet types of cookies available etc Changes in Demand Shifts T39eu have mere meney eel yetiquot re willing te buy beeee fer 6 e pieee thie merith ineteed ef ehift te the right El prime eppeite hepeene if yu went rte buy leee lfthe price increases to 8 you buy 2 boxesis that an decrease in demand NOits a decrease in the quantity demand the line didn t shift since 82 is still on the demand func on 1 Change in incomemore money buy moreusually If you have more money you might stop buying certain things a Normal goods goods where demand rises when income rises and falls when your income fallsex thin mints b Inferior goods goods where demand rises when income falls and falls when your income risesex when you have a full time job you re not going to buy ramen noodles any more c normal or inferior are based on personal preferenceif you love ramen noodles you re going to buy them no matter what which turn them into a normal good from your perspective 2 Changes in the prices of related goods in terms of consumption a Substitutes in consumption goods that are used in place of one anotherex oreos vs thin mints If the price of oreos increases she s going to buy more thin mints increasing the demand for thin mints b Complements in consumption goods that are used togetherex milk for the thin mintsif the price of milk increases i ll buy less milk which means I ll buy less thin mints c ex gas and carscomplements so if there is an increase in the price of gas they ll buy less gas use their cars less which decreases the demand for cars But the demand for hybrid cars increases because they use less gas 3 Change in expectations a Expected priceif you change the price itself it doesn t change the demand as mentioned earlier but this is talking about what you expect in the futureif you expect the price to rise people are going to buy more because they know it s going to get more expensive so it increases the current demand If you expect the price to fall you re going to wait until they go on sale etc which decreases the current demand b Expected incomeworks the same way as income lfwe expect our income to rise it increase our demand for normal goods but decreases our demand for inferior goods 4 Change in the number of buyers a Increase in the number of buyers increases demand for the productoverall so there are more peopleexample of nyc vs lafayette b Decrease in the number of buyers decreases demand for the product 5 Catchall category Change in tastes and preferences a When there is a snow storm demand for shovels go up b If a celebrity posts a picture of a pair of shoes the demand goes up because people want the same stuff they have c Trendsstuff going out of style d J Crew coats selling out after the president s daughters were seen wearing them e Study comes out saying eggs are bad for you


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