SUPPLY AND DEMAND VID

BUSINESS CYCLES

- 1 cycle occurs from trough to trough

- Cycle avg. 5 - 7 years

- Recessions last approx. 14 months

- Peaks and troughs meaningless b/c we never know we are in one until 

  its over

Recession/Contradiction- real GDP declines for 6 months

                          - due to reduction in spending

                          - increase in unemployment

 

Peak- Highest point of real GDP; shows max amount of spending and min unemployment; inflation is a problem.

Expansion (recovery)- Real GDP up b/c of increase in spending and decrease in unemployment.

Trough- Lowest point of Real GDP: max unemployment and min spending

CALCULATIONS

Marginal Cost= New TC - Old TC

TFC + TVC = TC
AFC + AVC = ATC
TFC /  Q  = AFC
TVC /  Q  = AVC
TC  /  Q  = ATC
AFC X  Q  = TFC
AVC X  Q  = TVC

ELASTIC AND INELASTIC

Elasticity of demand- measure of how consumers react in change of price

Elastic Demand- demand that is very sensitive to a change in price 
                -product is not a necessity
                - has available subs


Inelastic Demand- demand that is not very sensitive to a change in 
                    price
                  - product is a necessity
                  - few or no subsitutes
                  - people will buy no matter what

Unitary Demand- (E = I)

Price elasticity of demand - PED
How to find out PED
1. Quanity (New Q - Old Q / Old Q
2. Price (New P - Old P / Old P
3. % ▲in quantity demanded / %▲ in price = PED

Total Revenue- total amount of money on a form resources from selling goods and services
                      - Price X quantity = total revenue

Fixed Cost- a cost that does not change or alter no matter how much is produced (rent, mortgage,)

Marginal Cost- Producing one or more of a good)

DEMAND AND SUPPLY

Demand- is quantity's that people are willing to buy at various prices

Supply- is quantity's that producers or sellers are willing and able to produce at various prices.

The law of demand- there is an inverse relationship between price and quantity demanded

The law of supply- direct relationship between price and quantity supply (P▲, Q▲)

What causes a "change in quantity demanded (▲QD) and "change in quantity supplied (▲QS)
- PRICE

What causes a "change in demand" (▲D)

1. ▲ in buyers taste (advertisement)

2. ▲ in # buyers (population)

3. ▲ in income (normal or inferior goods)

4. ▲ in price of related goods (complementary or substitute)

5. ▲ in expectations

Normal goods- items that you buy when your not ballin with extra money

Inferior gods- items that you would not normal buy unless your ballin

Complementary- something that goes with the item or completes it (hotdog and bun)

Substitute- something that replaces a object that serves the same purpose (Coke and Orange juice)

What causes a "change in supply" (▲S)

1.▲ in weather

2.▲ in number of supplyers

3.▲ in technology

4.▲ in cost of production

5.▲ in taxes and subsidarys

6.▲ in expectations

PRODUCTION POSSIBILITY GRAPH

- shows alternative waves to use and economy resources

Contains-

.two goods

.fixed resources (L.L.C.E)

.fixed technology

.full employment of resources 

Efficiency-  using resources in such a way as to maximize the production of goods and services

Allocate efficiency-  products being produced are not most desired in society

Productive efficiency- produced in the least costly way, any point on curve.

Under utilization- fewer resources than an economy is capable of using

A) Inside curve (under utilization, attainable, inefficient
B-C) On Curve (attainable, efficient)
D) Outside curve (unattainable)





3 Types of movement that occurs withing the PPC
1. Inside the curve- resources are unemployed or underemployed
2. Along the PPC- efficient and employed

What causes the PPC/PPF to shift
1. Technological changes
2. Economic changes
3. ▲ in resources
4. ▲ in labor forces
5. Natural disasters/ War/ Famine
6. More education/ training (human capital)

UNIT 1 INTRO

Macroeconomics- The study of the economy as a whole, i.e, inflation, international trade, or wages.


Microeconomics- The study of individual or specific units of the economy, i.e, supply and demand, market structures, or business operations.


Positive economics- Attempts to describe the world as it is, "what is", and "collects/ presents" facts


Normative economics- Describes how the world should be, "ought to be", or "should be"


Needs- basic requirements for survival (food, water, shelter, clothes)


Want- Desires of citizens


Goods- tangible commodities, Capital goods- items used in creation of other goods, Consumer goods- goods intended for final used by the consumer


Services- the providing or a provider of accommodation and activities required by the public


Security- fundamental economic problem, how to satisfy wants with limited resources


Shortage- QD > QS

Factors of production

1.Land- natural resources

2.Labor- work force

3.Capital- normal/physical

4.Entrepreneurship- innovative/ risk taker