Week 1/15 - 1/22 Notes
Week 1/15 - 1/22 Notes Econ 2020
Popular in Principles of Economics: Microeconomics
verified elite notetaker
Popular in Business
verified elite notetaker
This 10 page Class Notes was uploaded by Karlee Castleberry on Friday January 22, 2016. The Class Notes belongs to Econ 2020 at Auburn University taught by William M. Finck in Spring 2016. Since its upload, it has received 185 views. For similar materials see Principles of Economics: Microeconomics in Business at Auburn University.
Reviews for Week 1/15 - 1/22 Notes
really helpful and straightforward!!!
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 01/22/16
Econ 2020 – Exam 1 Lecture 1 definition formula relationships between variables 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 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 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 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 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 Product markets: Firms provide goods and services Households provide money Resource markets: Households provide resources Firms provide money 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 D quantiti 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 Factors that shift the demand curve 1. Income: 5 o normal goods- income and demand move together 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 10
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'