Whole Class
When making a decision, the next best alternative is described as what?
Opportunity Cost
Define scarcity
Unlimited wants with limited resources
Where would a point in the PPC represent a production combination being impossible at the moment?
Outside the curve
Assume that an economies raw material resources and technology to make something were fine, how would a point end up inside a PPC?
Unemployment or underemployment
A rightward shift
Contrast Increasing and constant opportunity cost
Increasing = separate resources/products to make, makes the combination choices of making more of one and less of the other.
Constant = products are similar, able to manipulate similar resources, making opportunity cost lower/consistent
The law of demand states: as price increases, then what...
quantity demanded decreases
What are the 4 factors of production?
Land, labor, capital, and entrepreneurship
Resources are not equally suited for the production of both goods
Tell me the law of supply
It's a direct relationship between price and quantity supplied
If the demand for orange juice goes down, making people demand more milk.
Orange juice and milk are examples of what kind of goods?
Substitute
Which way will the demand curve shift if there is just a price change occuring?
NONE!
Price change alone does not shift the curve, there is just a movement along the curve
Assume that you are wealthy where a luxury car and fine dining are normal goods for you.
If you lost your current job, what would luxury cars and fine dining turn into?
Inferior Goods
Assume peanut butter and jelly are complementary goods for a PB&J sandwich as a final good.
If the price of peanut butter increases, what happens to demand for jelly?
The demand for jelly decreases.
Assume you are a farmer and you produce oranges.
What will happen to the supply curve if other orange grove farmers decide to get office jobs instead?
The supply curve will shift to the left, decreasing overall supply.
If Quantity Demanded is greater than Quantity Supplied, what situation do we currently have according to supply and demand?
A shortage
Why do countries try their best to increase their levels of productivity?
With resources being scarce, a need to find ways to maximize them efficiently
What is a price floor and where is it typically located in a market model?
A price floor is the MINIMUM (think floor) that can be charged to consumers of a product/service.
A price floor is set above market equilibrium, causing a surplus.
Remember: Suppliers want higher prices for more profits.
Assume the equilibrium of supply and demand market for Milk is as follows: Equilibrium price = $3 & Equilibrium quantity = 10 gallons
The local grocery store decides to increase the price of milk from $3 to now $6. What situation would this grocery store experience by doing this?
There will be more Quantity Supplied than Quantity Demanded, making a surplus of milk.
Surplus = occurs when we are above equilibrium
Assume we are at market equilibrium price and quantity. Now, there is an increase in demand and then a decrease in supply.
Tell me about the determinant or indeterminant nature of price and quantity now after these changes.
Hint: Draw this out to help you!
Price: Increased ; Determinant
Quantity: Increased & Decreased ; Indeterminant
In the hunger games econ movies, there are 12 districts that specialize in a certain good or service to provide for the overall economy (the capital).
When a country (a district) specializes in something to trade, this is a term that is an example of what concept?
Comparative Advantage
In the star wars econ movie, C3PO was forced to make a decision because someone was holding a thermal detonator.
C3PO having to make a decision under duress is an example of what part of exchange?
Involuntary
Let's say there is a point that sits outside of the PPC curve.
What are the two ways that can help us achieve that level of output?
1. Increase the quality or quantity of resources.
2. Increase or improve our technology.
Assume the equilibrium price in a gasoline market model is $3.
Now the government steps in and says that all gas companies must only charge $1 for a gallon of gas.
What would this be an example of and what situation would this cause in this market?
A price ceiling (think MAXIMIUM).
A price ceiling is set below market equilibrium price, causing Quantity Demanded to be more than Quantity Supplied.
Which would cause a shortage.
Tell me the difference between a change in Demand and Quantity Demanded
A change in overall demand increases quantity demanded at the same prices
Quantity demanded is a movement along the curve, where the only thing changing is price alone.