Econ 2101 Ch. 3- 9/9
Econ 2101 Ch. 3- 9/9 Econ 2101-008
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This 4 page Class Notes was uploaded by Meredith P. on Friday September 11, 2015. The Class Notes belongs to Econ 2101-008 at University of North Carolina - Charlotte taught by Per Norander in Summer 2015. Since its upload, it has received 100 views. For similar materials see Priciples of Economics- Macroeconomics in Economcs at University of North Carolina - Charlotte.
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Date Created: 09/11/15
Econ 2101008 Ch 3 Notes Wednesday 99 No Notes for Monday due to Labor Day Name the 3 fundamental questions that all economies must answer 1 What to produce and how much 2 How is it produced 3 For whom is this produced for Here s an idea of how economies answer these questions Centralized Planning Almost impossible to keep up with Current examples are North Korea and Cuba Production is strictly gov t regulated and shortages and famines often occur For Example Sweden and France are before the halfway mark these countries have more gov t influence throughout the production processes Relatively speaking the United States has more freedom in terms of production US government regulates things like large monopolies and child labor Free Market Form of Capitalism Recogntes Smith s idea of Ldisse Fdire Decisions are made by supply and demand means rather than being controlled by gov t Please keep in mind that these points are not fixed Things such as elections Supply and Demand A Market or times of crisis can move countries up or down the line A Market A combination of all potential buys and all potential sellers of a given good service or resource Sellers are often known as producers What s the difference between potential and actual buyers 0 Price is a factor that separates the potential amp actual 0 Price is OK for the actual buyer Price is in constant negotiation with what consumers are willing to pay and what sellers are willing to sell for SupplyDemand How prices are set and how much or what quantity with be bought and sold 0 Demand A demand schedule table or a demand curve graph that states the IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII o The relationship between price and quantity is a negative sloping one 0 When the price goes up the quantity demanded goes down this is known as the Example Demand Curve Price of Quantity 12 Pizza Demanded 10 m 10 100 2 s8 8 200 3 6 quotquotquot quot39 E 4 6 300 32 so 0 50 100 150 200 250 300 350 Quantity Pizza A negative relationship is seen because of the Income Effect A buyer s income is limited so when prices fall we can buy more of everything Opportunity costs go down as well Substitution Ettect Buyers will choose to buy more of cheaper alternatives Supply Shows the relationship between price and quantity that producers sellers want to supply or provide 0 Humans are supplying and demanding 0 We are all potential suppliers or Example for supply Supply Curve SH 3 s10 o Quan ri ry 8 0 quot Price of Supplied of quot5 6 0quotquot Pizza Pizza 4 513m 300 m 2 O 2 O 100 200 300 400 Quantity Supplied As The as depicled by The Trend line Why is the supply curve positive 0 Making more pizzas cos rs more money more workers are hired lo gel The job done 0 Increased produc rion crea res higher opporluni ry cos r so higher prices are required Examples of demandsupply Why choose 8 per pizza 0 In This case The Quanli ry Demanded 200 equals lhe Quanli ry Supplied 200 This is NOT The same as saying demandsupply Supply and Demand 12 Surplus 10 f quotquotquotn n nn jz f o 39 39 I m 39 I 2 8 l 5 I 39 n 0 I N I q o o 5 1 3 g I I 39I E 4 I Shonllage l I l I l 2 I I I I I 0 I I 0 50 100 150 200 250 300 350 Quantity Pizzas Look aT The charT above The pink doTTed line represenTs quanTiTy demanded and The blue doTTed line represenTs quanTiTy supplied The red doTTed lines represenT The relaTionship beTween price and pizzas supplied aT ThaT price for a given Time all oTher Things unchanged WhaT would happen if The price of pizzas were 10 0 AT 10 The auanTiTy demanded would be 100 pizzas o The auanTiTy supplied would be 300 pizzas 0 Thus a surplus of 200 would be leTT o LocaTe The surplus area on The graph thT would happen if The price of pizzas were 6 0 AT 6 The auanTiTy demanded is 300 pizzas o The auanTiTy supplied is TOO pizzas o A shorTage of 200 pizzas would occur excess demand 0 In a shorTage The price of goods Tend To increase 0 LocaTe The shorTage area on The charT Due To The fdcT Tth shorTages and Times of surplus can occur based on The infordeion provided The in This case is 8 per pizza because QUdnTiTy Demanded is equal wiTh QuanTiTy Supplied