Price Ceiling + Price floor- January 20, 2017

Price Ceiling + Price Floor

• Equilibrium:
  -The point at which the supply curve & demand curve intersect
  
  
• Excess Demand:
  -Quantity demanded is greater than quantity supplied -> shortage
  -Consumers cannot get enough quantities they deserve 

• Price Ceiling:
  -occurs when the gov puts a legal limit on how the price of a product can be
  -ex) Rent Control
• Excess Supply:
  -Occurs when Quantity supplied is greater than quantity demanded -> surplus

• Surplus:
  -Produces have inventory that they cannot get rid of
• Price Floor:
  -Lowest legal price a commodity can be sold at
  -Used by the gov to prevent prices from becoming too low
  -ex) Minimum Wage

Calculating Elasticity- January 11, 2017

Calculating Elasticity

• STEP 1:
  
  New Quantity - Old Quantity
  Old Quantity
• STEP 2:
  

  New Price - Old Price
  Old Price

  
  
• STEP 3: PED
  

  % change in Quantity
  % change in Price
• STEP 4: Total Revenue
  

  Price x Quantity

Price Elasticity of Demand- January 11, 2017

Price Elasticity of Demand

• Elasticity of Demand:
  -measure of how consumers react to a change in price
• Elastic Demand: 
  -Demand that's very sensitive to change in price
  -Product is not a necessity
  -There are available substitutes
      1) Soda
      2) Fur-coat
      3) Pizza
  -E > 1
• Inelastic Demand:
  -Demand that's not very sensitive to a change in price
  -Product is a necessity
  -There are few or no substitutes
      1) Gas
      2) Salt
      3) Insulin
  -E < 1
  
  
• Unitary Demand:
  -E = 1
  
  
  
  

Production Possibilities Graph- January 5, 2017

Production Possibilities Graph

• Production possibilities graph (ppg): shows alternative ways to use an economy's resources.
  -Line on the PPGis known as the frontier or curve
  -When producing at the frontier, efficiency occurs
  -When producing beneath the frontier, underutilization occurs
• Efficiency: using all resources in such a way to maximize the production of goods and services
  -increases profits
  
  
• Underutilization: opposite if efficiency
  -using fewer resources than an economy is capable of using.
  -leads to decrease in profits

• 4 assumptions:
  -Only two goods can be produced
  -Full employment of resources
  -Fixed resources (factors of production)
  -Fixed technology
  
  
• Three types of movements that occur within the PPC:
  -inside the PPC
  -along the PPC
  -shifts of the PPC
  
  
• Two types of Efficiency:
  1) Productive Efficiency
      -Products are being produced in the least costly way
      -This is any point on the PPC
  2) Allocative Efficiency
      -The products being produced are the most desired by society
      -This optimal point on the PPC depends on the desires of society.

Factors of Production- January 4, 2017

Factors of Production

1. Land
   -natural resources
2. Labor
   -work exerted
3. Capital
   1) Human Capital: people acquire skills and knowledge through experience + education
   2) Physical Capital: money, tools, buildings, and machines. 
4. Entrepreneurship 
   -risk taker, combines factors of production in order to become successful

• Trade offs: an alternative that we sacrifice when we make a decision
• Opportunity cost: The most desirable alternative given up as a result of a decision (the next big thing)
•  Guns or Butter: Refers to the trade-offs that nations face when choosing whether to produce more or less military/ consumer goods.
• Thinking at the Margins: Deciding whether to add or subtract an additional unit of some resource.
  
  
  
  

Basic Concepts of Economics- January 3, 2017

Basic Components of Economic

I. Macroeconomics vs. Microeconomics

1. Macroeconomics: 
   -study of the economy as a whole
   -ex) international trade, inflation
2. Microeconomics:
   -study of individual or specific units of the economy
   -ex) Supply and Demand, market structures, business organization 

II. Positive Economics vs. Normative Economics

1. Positive Economics:
   -Claims that attempt to describe the world as it is.
   -Descriptive
   -Collects and presents facts
2. Normative Economics:
   -Claims that attempt to prescribe how the world should be
   -Opinion based

III. Needs vs. Wants 

1. Needs:
   -Basic Requirements for survival
2. Wants:
   -Desires

IV. Scarcity vs. Shortage

1. Scarcity:
   -Fundamental economic problem that all society faces
   -How to satisfy unlimited wants with limited resources 
2. Shortage:
   -Quantity demanded is greater than Quantity supplied. 

V. Goods vs. Services

1. Goods:
   -Tangible commodities
   -Something you can touch and feel.