ECON 142 Week 1 Notes
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This 2 page Class Notes was uploaded by Noah Johnston on Saturday August 27, 2016. The Class Notes belongs to Econ 142 at Kansas taught by Dr. Brian Staihr in Fall 2016. Since its upload, it has received 337 views. For similar materials see Microeconomics in Economics at Kansas.
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Date Created: 08/27/16
ECON 142 Week 1 Notes Chapter 1 ECONOMICS – the study of choices people make to attain goals when given scarce resources Micro: A single person, firm, or industry Macro: As a whole, inflation, unemployment, debt Equity: Fairness in every measure Efficiency: No waste whatsoever Three Main Ideas: 1. People are rational 2. People respond to incentives 3. Optimal decisions are made at the margin Margin: Additional; a little bit extra Opportunity Cost: The value of something you didn’t do Positive: Simply a statement of fact Normative: A statement that involves any judgment. A statement of what “Should be” Markets and a Market Economy Market: A set of buyers and sellers whose actions affect the price of a product Market Economy: Buyers demand and sellers supply … Goods/Services are produced based on supply and demand Centrally Planned Economy: Goods/Services are produced based on government decision Productive Efficiency: Goods and services are produced at lowest cost Allocative Efficiency: Produced in accordance to buyers’ preferences Chapter 3 Law of Demand: At low prices, large quantity will be demanded. At high price, low quantity will be demanded, “Ceteris Parubis” (all else held equal). Demand Curve: The way demand rises or lowers depending on the price of a product. A change in price: Causes movement along the demand curve. This is called a “change in the quantity demanded”. When the curve shifts to the right, demand increases. Curve shifts left, demand has decreased. Change in something else: Causes the same shifts, but is now a “change in demand”. Demand Shift Factors 1. Change in income For most things, when income goes up, so will demand. These are called normal goods, like BMWs. But for a few goods, called inferior goods, demand will go down when income rises, an example being ramen noodles. Changes in income cause the demand curve to shift for an individual, market to market, and even an entire country. 2. Change in the price of related goods Things you buy to use together, like peanut butter and jelly, are called complements. Things you buy instead of another product, like Diet Pepsi or Diet Coke, are called substitutes. Key idea to take away from Week 1: Change in quantity demanded = a change in price. Change in something else = a change in demand.
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