The Beginning (Unit 1) Notes

Alright so this is my first post.. Don't know exactly if this is right or not, but i hope its good enough. Leave a comment at the bottom and I hope you like!    d[-_-]b 
(Click "Read More")    ;)



MicroEconomics: The study of how households and firms make decisions and how they interact in the market. ( In other words, how companies make the most money by supplying what is popular at the time)  Ex. Supply & Demand

MacroEconomics: The study of the major components of the economy 

• Examples of Major components:

1. Unemployment
2. National Income
3.  Rate of Growth
4.  Gross Domestic Product
5. Inflation
6. Price Levels

• Still Don't Understand? Here, Check this website for more info: http://www.investopedia.com/terms/m/macroeconomics.asp#ixzz2Hv1yxFVm 

 

Positive Economy: Claims to present the world as it is; Very descriptive of nature.
Example: Minimum Wage laws causes unemploymeny

Normative Economy: Claims that attempt to prescribe how the world should be; Descriptive in Nature.
Example: The Government should raise the Minimum Wage.
 
Wants: Is a DESIRE
Needs: BASIC Requirement for survival 

Scarcity: The most fundamental economic problem facing all societies (In other words, How to satisfy unlimited wants with limited resources.)
Shortage: The Quantity demanded is greater then quantity supplied 

Goods: Tangible camataty

• Capital Goods: Items used in the creation of other goods.   Ex. Steel, Machinery, Computers,etc.
• Consumer Goods: Goods that intended for final use by the consumer  Ex. Hamburgers :d

Service: Cannot be touched or felt. It is work performed for someone else.

4 Factors of Production (IMPORTANT!!!!):

1. Land: Natural Resources
2. Labor: Work Exerted 
3. Entrepreneurship: Risk Taking
4. Capital:

• Human: Skills or Knowledge acquired 
• Physical: Machinery, Equipment

Opportunity Cost: The most desirable alternative given up by making a decision
Guns or Butter ~ Tradeoff: The U.S. problem between spending more on WEAPONS OF MASS DESTRUCTION or Social Programs
Production Possibility Graph (PPG): Shows alternative ways to use resources; Each point on a grapg shows a trade off 


Production  Possibility Curve (PPC): Models economy by mapping production of one good on the x-axis and one on the y-axis. The curve may change due to amount of resource and technology as you'll see :P  

PPC Shift to Right: Some reasons that the graph moves to the right. (OUTSIDE the Graph) (BOWED OUT)

1. Technology Advancement 
2. Discovery of new resources
3. Trade (Comparative Advantage)

PPC Shirt to Left: Some reasons that the graph moves to the left (INSIDE the Graph) (BOWED IN)

1. Decrease in Work Force, Skill, or Education Level
2. Permanent lost of Productive Capacity (Ex.  WAR, Taxes, or Government Regulations)

3 Types of Movement of PPC: 

• INSIDE: Unemployment, Underemployment of Resources
• OUTSIDE: Economic GROWTH, Technology Improvement
• ALONG: Ceteris Paribus (Yeahh... confusing to say or remember but here a DEF.) - Conditions remain the same. 

 
Production Possibility Frontier (PPF): Basically the same as PPC
Increasing Opportunity Cost: The opportunity cause for creating a unit increase as more of the product increase.
Graph are Concave - Bowed out or In:

• 4 Assumption can be made:

1. Assumption of Resources
2. Assumpition of Technology
3. Full Employment and Productivity Efficiency
4.  2 Products are being considered

Production Efficiency: Product at the lowest cost allocated resources efficiently
Allocative Efficiency: Combination most desired by society are those charge of economic decisions 

* SUPPLY & DEMAND
YEAhhh these are all pictures so enjoy :)


STEP BY STEP OF HOW TO DO!! (MAKE SURE TO HAVE SOMETHING STRAIGHT OR YOU'LL FAIL! LINES GOTTA BE STRAIGHT)
1.) Read and Find your market and Determinant (Thing thats changing your market; There is a list in the picture above)   
                                                                                                                        
2.) Put on the y-axis "Price of (your market)"

3.) Put on the x-axis "Quantity of (your market)"

4.) Draw your first Demand and Supply line; Label them D1 and S1 (They should cross each other)

5.) Determine if the Demand or the Supply is changing
6.) Once you find out which is changing, Find out if that thing is increasing (To the Right) or Decreasing (To the Left)
7.) Draw a ling according to if it is moving Left or Right and lable that D2 or S2 (Depending if the supply or demand is changing)

8.) Next place a dot on where your First supply and demand line touch  (Where D1 and S1 Touch)

9.) Now make dotted lines connecting the dot to the x-axis labeling that Q1 and another dotted line connect the sot to the y-axis labeling it P1

10.) Finally do the same for the line that represents the change and label those P2 and Q2



OTHER EXAMPLES Just to help:



Whoops.. i forgot there is writing haha

Elastic of Demand: A measure of how a consumer reacts to a change in price

• Elastic Demand: Demand that is very sensitive  to change of Price; There not a necessity and has many substitute.  (E>1)   EXAMPLES: Soda ( Original: Dr. Pepper  Substitute: Dr. Thunder, Dr.k, man there is so many), Steak, and Coffee  yuummm. Starbucks :)
• Inelastic Demand: Demand that is not very sensitive to change in price; Necessity and doesnt have many substitutes. IT ONE OF A KIND haha (E<1)   EXAMPLES: Gas, Milk ( Yes milk is a necessity because it makes cheese and yogurt and a lot of stuff), Sugar, Salt, Insulin
• Unit elastic or unitary Elastic Demand: You should already know what this is, its in the middle (E=1); not many things fall under this category

Here is an example of how to solve and get which Demand you have 


EQUATIONS (if you cant see them on the Picture):



Step 1: (New Quantity - Old Quantity)/ Old Quantity
Step 2: (New Price - Old Price)/ Old Price
Step 3: Absolute value of ( (Step 1) / (Step2) )
Step 4: Now look to see if its great, less, or equal to one and chose on of the demands :)

Total Revnue: The total amount of money that a firm receives from selling goods and services

• Equation: P (Price) * Q (Quantity) = TR (Total Revenue)

Fixed cost: A cost that does not change no matter how much it is produced 

• Examples: Salaries, Mortgage, and Car Notes

Variable cost: A cost that raises or falls depending on how much is produced

• Examples: Electricity, CELL PHONE!, Water, and some more that i know you know

Marginal cost: The cost of producing one additional unit of a good
Marginal Revenue:  Additional income from selling one more unit of a good

Now to calculate all these thing, you need some equations, Luckily i got some to give you guys so USE THEM!!

• Well i told you this one already but Total Revenue: Price * Quantity 
• Marginal Revenue: (New Total Rev.) - (Previous Rev.)
• Helpful TIP: Total Fixed Cost does not change... so whatever you start with will continur through the chart. :P just thought you should know 
• Total Variable Cost: (Average Variable Cost * Quantity) Or (Total cost - Total fixed cost)
• Total Fixed Cost: (Average Fixed Cost * Quantity)
• Total Cost: (Total Fixed Cost + Total Variable Cost) Or (Old Total Cost + Current Marginal Cost)
• Marginal Cost: (New Total Cost - Old Total Cost)
• Average Total Cost: (Total Cost/ Quantity) Or (Average Fixed Cost + Average Variable Cost)
• Average Variable Cost: (Total Variable Cost/ Quantity)
• Average Fixed Cost: (Total Fixed Cost/ Quantity)

 Yeah i know a lot of equations but yeah, use them to solve for each other, i don't know if i got all of them. But other equations can be used to solve each other.

Here is some examples of examples of how the equations are used (Note that the answer are already there, but you can see that if you plug into the equations the numbers are right)





Okay almost done, just one more thing..

Price Floor: When companies have a surplus (Abundance) of products, that the QD (Quantity Demand) is lower then the QS (Quantity supplies)  QS > QD

• Example: Minimum Wage!

Price Ceiling: When companies have a shortage of product, that the QD (Quantity Demand) is Higher then the QS (Quantity Supllied)  QD > QS

• Example: Rent Control!

    
 
Hope this help out in a way.. Im Done, Til Next Time
SEE YA! ;)