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ECON 201: Microeconomics

by: Jensine Bonner

ECON 201: Microeconomics Econ 201

Marketplace > Towson University > Economcs > Econ 201 > ECON 201 Microeconomics
Jensine Bonner
GPA 3.6

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About this Document

These notes cover what was discussed in Professor Leppo's ECON 201 class at Towson University.
Microeconomic Principles
Dr. Leppo II
Class Notes
Microeconomics, Econ, Econ 201, towson, towson univeristy, University, notes
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This 5 page Class Notes was uploaded by Jensine Bonner on Sunday February 14, 2016. The Class Notes belongs to Econ 201 at Towson University taught by Dr. Leppo II in Winter 2016. Since its upload, it has received 78 views. For similar materials see Microeconomic Principles in Economcs at Towson University.


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Date Created: 02/14/16
ECON 201: Microeconomics Notes taken, interpreted, and formatted by: Jensine Bonner Week 2 of Notes; Chapter 2 2/5/16 th February 5 , 2016 Key (Abbreviations of Important Terms):    (HH)- Household (BF) - Business Firm (G)- Government (s) - services (g) - goods (l)- labor (K)- Capital (S)- supply NEW (MC)- Marginal Cost NEW (MP)- Marginal Principle NEW (MB)- Marginal Benefit Marginal Principle (MP)          ­ Opportunity Cost (OC)                      Is what a consumer chooses to sacrifice to get something else                      ­Relative Prices: Production of a good & or service stated in terms  of another good (g) or (s) service (Ex. 1 Cake or 4 cupcakes)                     ­ OC of 1 cake= 4 cupcakes                      ­ OC of 1 cupcake= ¼ cake             1) Marginal Benefits (MB): Extra benefits resulting from a small  (incremental) increase from a given activity            Marginal Cost (MC): Extra cost resulting from a small (incremental) increase  in a given activity    The answer to many problems in Microeconomics will be MB=MC. Why?              ­MB must go down, MC must go up, and the overall MB will increase.             ­ Overall, you (consumer) are most often thinking about your own  satisfaction 2/8/16  February 8 , 2016 *Opportunity Cost (cont.)* Explicit Cost :Have to pay directly *($$)* Implicit Cost :Didn’t pay it out *forgone, could’ve but didn’t* Ex.1) Attending College Tuition & Books: $ 30,000   (Explicit Cost) Forgone Income: $ 40,000    (Implicit Cost) Food: $ 4,000                    (Not part of opp. cost for attending college)  Apartment: $6,000            (Not part of opp. cost for attending college) 30,000 + 40,000= 70,000 (total opp. cost) Production Possibilities Frontier (Curve) Is a curve that shows the possible combination of production a BF can produce  while fully utilizing their F or P (Factors of Production)  ­When a curve is exaggerated in the middle, there are imperfect substitutes ­The closer the products are in substitutability, the straighter the line will be ­Normally, you will be producing, and should be producing on the curve          ­Can produce anything on or within the curve          ­Outside of the curve is where you want to be, since outside of the curve  shows more production  2/10/16 February 10, 2016 *Marginal Benefit (cont.)* Diminishing Returns: Essentially when 1 input increase while all other inputs remain fixed, Y will  increase at a decreased rate.  ­ The output will increase, but at a slower rate than it would if you increased  the others as well Short Run: When (1) or more factors of production are fixed Long Run: A period long enough for a BF to change all factors of production Nominal Value: The real value of something (Ex. $5 is $5 because it literally says $5) Real Value: What you’re able to exchange it for ­ Anything that can be exchanged/trade for something ­ Anything you can buy with it Voluntary Exchange: The act of buyer & seller when, both parties are freely & willingly engaging in  economic transaction ­ Exchange more equitable than “gifts” ( what is free, nothing is given to earn  it) ­ Trade/Voluntary exchange is good and most profitable because there is no  change to overall wealth  *End of Chapter 2* Chapter 3 What role do markets serve? Trade or exchange of goods ­ Large BF’s are opposed to free markets & exchanges. Why?        markets force business’ to compete ­ Business’ desire to sell you as much (product) for as much money (cost) as  they can  ­ The competition between BF’s is what fosters efficiency ­ A direct cost to business is posed when a BF does not minimize price, but  can’t minimize cost            ­BF’s don’t actually want to compete, but they have to Mercantilism: The driving reason behind why Adam Smith wrote the ‘Wealth of Nations’ ­ Main point o’ Mercantilism is zero­sum gain which translates to the idea that a market economy is inheritably flawed ­  (The idea that) (A) is better off only if (B) is worse off *Socialism & Communism are based upon zero­sum gain* * Colonization & the slave trade are often backed up by the principles used in  Mercantilism* Absolute Advantage: The ability of a person, BF, or G to produce goods at a lower absolute or resource  cost Theory of Competitive Advantage: The ability of a person, BF, or G to produce at a lower OC Circular Flow is a Diagram which shows: The flow of goods & $$ between markets  1) Factors Market: *Also referred to as the input market* When inputs that produce goods & services are sold by the owner of the factors of  production           ­It’s role is to aide BF’s in finding resources  2) Product Market: The output or allocation market         ­Organizations that sell what is produced (Ex. Target & Walmart) End of Week 2 Notes, and end of Chapter 2 Notes. Notes will be uploaded weekly, so be sure to come back again! ­ Jensine Up Next: Week 3 Notes (A continuation of Chapter 3 notes, and the beginning of  Chapter 4 notes)


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