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ECON 1102 - Week 1 Notes

by: Colin Fritz

ECON 1102 - Week 1 Notes ECON 1102

Colin Fritz
U of M
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About this Document

These notes cover basic microeconomics concepts.
Principles of Macroeconomics
David Bradley
Class Notes
Economics, Macroeconomics, Microeconomics, week 1, notes




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This 2 page Class Notes was uploaded by Colin Fritz on Sunday September 11, 2016. The Class Notes belongs to ECON 1102 at University of Minnesota taught by David Bradley in Fall 2016. Since its upload, it has received 35 views. For similar materials see Principles of Macroeconomics in Macro Economics at University of Minnesota.


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Date Created: 09/11/16
ECON 1102 Week 1 Notes Colin Fritz Microeconomics Review  Benefits of trade - Allows for specialization (focusing on one type of good to become more efficient) - Increases knowledge which in turn increases productivity - Growth is mainly due to knowledge so all of these benefits causes a beneficial upwards spiral (this is because people are more educated – scientists, engineers, etc.) Concepts to Know Comparative advantage – the ability to produce at a lower opportunity cost An example of this is Pam has a comparative advantage at producing apples because to produce one apple she only has to give up 3 pears compared to Jim’s 5 pears. Jim 1 5 apple/hour pears/hour Pam 1 3 apple/hour pears/hour Absolute advantage – the ability to produce using fewer inputs Using the same scenario Jim has an absolute advantage at producing pears because he can produce more pears in the same amount of time. Opportunity cost - what is given up to produce a good Using the same scenario this is an opportunity cost chart. Cost of Cost of producing one producing one apple pear Jim 5 pears 1/5 apple Pam 3 pears 1/3 apple The opportunity cost is also the slope of a production possibility curve Supply and Demand Demand - willingness to buy at a particular price (as a quantity) Supple - willingness to sell at a particular price (as a quantity) Equilibrium – when supply and demand are equal Shifters of Demand (increase in demand means shift to the right and vice- versa) 1. Income - (increase then demand increase) 2. Population - (increase then demand increase) 3. Price of Substitutes - (increase then demand decrease) 4. Price of Compliments - (increase then demand increase) 5. Expectations of price - (increase then demand decrease) 6. Tastes (fads or trends) Shifters of Supply (increase in supply means shift to the right and vice- versa) 1. Technological innovation - (increase then supply increase) 2. Taxes and subsidies - taxes decrease and subsidies increase 3. Expectations – same as demand 4. Entry and exit of the industry 5. Changes in opportunity cost Surplus – Quantity supplied is greater than quantity demanded Shortage – Quantity demanded is greater than quantity supplied Equilibrium – Where supply meets demand Producer surplus – The producers gain from an exchange (measured by the area above the supply curve and below the market price) Consumer Surplus - The consumers gain from an exchange (measured by the area below the demand curve and above the market price) Price Ceiling- A maximum price allowed by law Price Floor - A minumum price allowed by law Binding and non-binding- A price ceiling/floor is binding when the price and quantity of the market are different when implemented. If the market is unaffected then the price ceiling/floor is non-binding.


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