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Microecon-page 23

Up to page 23 in notes

Economics Social science,concerned with how ppl + firms + governments choose to allocate scarce recources
Opportunity cost value of resource in its next best use. Ex. Cost of free checking
Rational behavior when facing options, choose the one you think is best.
Importance of Marginal analysis value/cost of next unit. Ex. airplane seat
Externality someone not involved in transaction that suffers or benefits ex.basketball hoop
Cost disease of personal services productivity (output produced) has stayed the same. Productivity in others sectors determine wages even in sectors with no productivity gain. (higher income, higher opportunity cost)
Trade off between output and equality When operating efficiently, policies that stimulate growth make distribution less equal, policies designed to lead to more equality slows growth.
Economic model simplification of an economic activity, either in graphs, or words, used to explore the direction of resource allocations
X and Y are positively related same direction, x goes up, so does y.Slope is positive
X and Y are negatively related opposite directions, x goes up, y goes down. Slope is negative
Linear form of function straight line, no exponents. Y=ax+b, a is vertical, b=slope of line (rate of change)
Intersection set y's equal to each other
Resources land, labor, materials (things used to make something else, but are used up), capital (used repeatedly to make something else)
economic vs financial capital money, stocks, CDs, bonds, etc. are not economic capital
depreciation subtraction from the capital stock
Investment additions to the capital stock
Market system resources are allocated via no interactions of individual agents and firms. All acting in their own best interest
Market economy resources go to the agents that value them the most in terms of money (value depends on needs, wants and income)
quantity demanded how much buyers want to (and have the means to) buy at a given price
demand all of the quantities demanded at the different prices, holding everything else equal
demand vs. quantity demanded quantity demanded changes when the price changes, demand doesn't
demand curves downward sloping, price of quantity demanded are inversely related
Law of demand as price goes up, quantity demanded goes down
normal good as income goes up, demand goes up. Income and demand move in the same direction
Inferior good as income increases, demand increases
Complements if price of complement goes up/down, demand of your good goes down/up
Substitutes if price of substitute goes up/down, demand for your good goes up/down (ex.coke, pepsi)
Giffen good violates law of demand (as price goes up, quantity demanded goes up)
Market demand is the horizontal sum of all of the individuals' demand curve
quantity supplied amount sellers want to and are legally able to sell at a given price
market supply horizontal sum of individual supply curves
supply curves slope upwards
Created by: KSiobhan