Introduction to Economics
It is the study of how society manages its scarce
resources?
Economics
It indicates how much of a good consumers are willing and able to buy at each possible price during a given time period, other things constant.
Demand
It indicates how much of a good producers are willing and able to offer for sale per period at each possible price, other things constant
Supply
It measures responsiveness to
price changes.
Elasticity
The primary producing units in an economy.
Firm
The best alternative that we give up, or forgo, when we make a choice or decision.
Opportunity Cost
- The higher the price, the smaller the quantity
demanded.
- The lower the price, the larger the quantity
demanded.
Law of Demand
The lower the price, the smaller the quantity
supplied
The higher the price, the greater the quantity
supplied
Law of Supply
If a 5% increase in Price leads to a 10% decrease quantity demanded. Solve for the Elasticity of demand.
2
The markets in which goods and services are exchanged.
Product or Output Markets
Human wants tends to be unlimited, but human, natural and capital resources are limited.
Scarcity
The demand increases when income increases and decreases when income decreases
Normal goods
It is the sum of individual supplies of all producers in the market.
Market Supply
If the elasticity of demand for spring break packages to Cancun is -2, and if you notice that this year in Cancun the quantity of packages demanded increased by 5%, then what happened to the price of Cancun vacation packages?
-1%
Sum of all household’s wages, salaries, profits, interest payments, rents and other forms of earnings in a given period of time.
Income
Why study economics?
1. To learn a way of thinking
2. To understand society
3. To be an informed citizen
4. To understand global affair
Two goods are _______ if an increase in the price
of one shifts the demand for the other rightward and,
conversely, if a decrease in the price of one shifts the
demand for the other good leftward.
Substitutes
It refers to the supply of an individual producer.
Individual Supply
The percentage change in quantity supplied rises from 120 to 140 as the price rises from P 1,000.00 to P 1,500.00. What is the approximate price elasticity of supply?
-38.45
A table showing how much of a given product a household would be willing to buy at different prices.
Demand Schedule
Costs that cannot be avoided because they have already been incurred.
Sunk Cost
What are the shifters of Demand?
Money income of consumers
Prices of related goods
Consumer expectations
Consumer tastes
What are the shifters of Supply?
State of technology
Prices of relevant resources
Prices of alternative goods
Producer expectations
Give four examples of a good that is considered as elastic.
-furniture
-motor vehicles
-professional services
-transportation
The change that takes place in a demand curve corresponding to a new relationship between quantity demanded of a good and price of that good.
Shift of Demand Curve