General
Unlimited wants but limited needs
scarcity
Supply curve slants (show with your arm)
Demand curve slants (show with your arm)
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The PPC represents
the possibilities between 2 goods or services that can be produced in a market
The difference between micro and macro economics
micro studies the decisions of business and small-scale markets; macro analyzes how these decisions effect the nation and globe on a larger scale
When the market is at harmony
equilibrium
A change in price results in ____ (regarding the curve)
movement along the curve
The two players in the market are
consumer and producer ; buyer and seller
What is assumed about employment in the PPC?
the market is operating at maximum or full employment
The difference between elastic and inelastic goods
the more elastic something is, the more likely someone is to purchase it despite a rise in price. if something is inelastic, someone won't want it if price rises.
The four resource factors
land, labor, capital, entrepreneurship
The law of supply states
(ceterius paribus) An increase in price = an increase in quantity produced
Law of demand states
As the price for a good decreases, the demand for that good increases
Any point outside of the PPC is considered to be
unattainable with current resources
traditional, command, free, mixed (we have mixed)
As long as something makes you happy, you will continue to do it
law of marginal utility
A supply schedule is
A T-chart holding the same information displayed on a supply graph
When demand or supply shifts to a new position, equilibrium
also shifts to a new position on the graph to fit the new needs of the market
Any point inside the PPC is
attainable, but it would not be logical to operate at because we would not be utilizing maximum resources
A. Maria goes to buy scrunchies, but notices that the price for 2 hair scrunchies has risen from $1 to $3. She instead buys a pack of 10 hair ties for $3.
B. Ethan goes to HEB to buy some cereal and sees that there's a sale on shaving razors (50%) off. He figures it's a great deal, and also buys a bottle of shaving cream so he can use the razor.
A. substitute
B. compliment
Jessica: 300 cupcakes , 100 tarts
Joseph: 200 cupcakes , 100 tarts
based off of this information, who has the absolute advantage and who has the comparative advantage in each good?
cupcakes: Jessica has the ABSOLUTE ADVANTAGE because she produces the most cupcakes overall. She also has the COMPARATIVE ADVANTAGE, because 1/3 is smaller than 1/2.
tarts: nobody has the ABSOLUTE ADVANTAGE, because 100 is the same number of tarts for both producers. However, Joseph has the COMPARATIVE ADVANTAGE in tarts because 2 is smaller than 3.
5 shifters of supply
1. # of sellers in a market
2. level of technology in market
3. prices of INPUTS (NOT price of the final good in the market)
4. government regulation
5. related products (substitutes/compliments)
The five factors that shift demand
1. tastes or preferences of consumers
2. number of consumers for that market
3. price of related goods (substitutes/compliments)
4. income of consumer
5. future expectation of consumer
The three shifters of the PPC
1. Change in resource quality or quantity
2. Change in Technology
3. Change in Trade
Five key economic assumptions
1. Society has unlimited wants and limited resources (scarcity).
2.Due to scarcity, choices must be made. Every choice has a cost (trade-off).
3. Everyone’s goal is to make choices that maximize their satisfaction. Everyone acts in their own self-interest.
4. Everyone makes decisions by comparing the marginal costs and marginal benefits of every choice (rational).
5. Real-life situations can be explained and analyzed through simplified models and graphs.