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ECNS 101 Week 4 Notes

by: Bronwyn

ECNS 101 Week 4 Notes ECNS 101IS-001


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About this Document

Lecture notes from 9/20 and 9/22
Economic Way of Thinking
Holly Fretwell
Class Notes
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This 2 page Class Notes was uploaded by Bronwyn on Friday September 23, 2016. The Class Notes belongs to ECNS 101IS-001 at Montana State University taught by Holly Fretwell in Fall 2016. Since its upload, it has received 14 views. For similar materials see Economic Way of Thinking in Economics at Montana State University.


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Date Created: 09/23/16
9/20:   ● The role of business  ● Market interaction between buyer and seller  ○ Free market decisions best to consumer and producer (no gov’t)  ● Business  ○ Coordination of inputs to accomplish production goals  ● “Doing well by doing good”  ○ Satisfying consumer demand generates profit  ● Businesses  ○ Specialize in production  ○ Can produce at lower cost  ○ Produce and provide greater variety, quantity, and quality  ● Specialization = pursuing specific line of study/work  ● Productivity = quantity of output per unit of input   ○ Marginal productivity = additional output to additional unit of input  ● Comparative advantage = ability to produce at lowest opportunity cost  ● Markets and business encourage  ○ Production  ○ Competition  ■ Low costs  ■ High productivity  ■ Production in area of comparative advantage  ● Profits and losses are important signals  ○ Creative destruction  ■ New industry + development → old industry ­ job loss  ● Firms  ○ Moral responsibility  ○ Personal satisfaction  ○ Obey laws and regulations  ○ Profit maximization  ● Supply curve  ○ Shows quantity supplied for each possible price  ○ Opportunity cost to produce one more unit  ○ Marginal cost to produce one more unit  ● Law of supply  ○ Positive relationship between price and quantity  ○ Incr price → incr Q​   s ● Change in Qs   ○ When supply decr → price incr → change in quantity supplieds​Q​ )  ○ If only price increases, profits also increase  ● Causes of supply change  ○ Price of inputs  ○ Technology  ○ Number of firms  ○ Taxes and regulations  ○ Disruptions and expectations    9/22:  ● Change in price changes quantity supplied  ● Supply changers  ○ S​ bsidies and Taxes  ○ T​echnology  ○ O​ther Goods  ○ R​esource Cost  ○ E​xpected Prices  ○ S​ize of Market  ● From Demand: TE = PxQ → in Supply: producer revenue = TR = TE = PxQ  ○ TR changes with tax/subsidy  ● Supply curve ­ minimum willingness to accept to produce  ○ Price = $/unit  1​ ○ Producer surplus = PS = above S curve, below market price =2​ /​ bh  ○ Total cost = TC = TR ­ PS = under S curve  ● Profit = TR ­ TC = PS  ○ Net gains to producers from suppliers  ● Equilibrium where demand = supply  ○ Market equilibrium  ■ Doing well by doing good  ○ If P<P​  → demand shortage, supply surplus  eq​ If P>eq​ → demand surplus, supply shortage  ● Net gains = economic surplus = CS + PS  ● Price signals the opportunity cost of resource use, buyers, and sellers 


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