Sunday, January 24, 2016
Supply and Demand
Demand
- Demand is the quantities people are willing and able to buy at various prices.
- The Law of Demand:
- There is an inverse relationship between price and quantity demands
- As price increases, Quantity Decreases
- Change in price causes a "change in quantity demanded"
- What Causes Change in Demand??
- Change in Buyres Taste (Advertisements)
- Change in number of buyers (Population)
- Change in Income (Normal/Inferior Goods)
- Normal Goods: An increase in income, leads to increase in demand
- Inferior Goods: In increase in income, leads to decrease in demand
- Change in Price of Related Goods (Complementary/Substitute)
- Complementary: Oftenn associated with the product (Peanut Butter and Jelly)
- Substitute: Can be used instead of product (Coke and Pepsi)
- Change in Expectation (Future)
Supply
- Supply is the qualities producers or sellers are willing and able to produce at various supply
- There is a direct relationship between price and quantity supply
- Change in price also causes a "change in quantity supplied"
- What Causes change in supply??
- Change in technology
- Change in weather
- Change in cost of production
- Change in number of sellers
- Change in taxes or subsidies
- Change in expectation
Supply and Demand Graph
Price Ceiling and Floor
Trade Offs and PPC's
Trade Off
- Alternatives we give up whenever we choose one course of action over another.
- Opportunity costs
- Next Best Alternatives
- Fixed Costs
- Costs that don't change no matter how is produced
- Ex: Rent, Mortgage
- Variable Cost
- Cost that rises or falls depending upon how much is produced
- Ex: Electricity
- Marginal Cost
- Cost of producing one more
- Unit of good
PPC
Intro to Macro
Macro-economics V. Micro-economics
- The Study of the economy as a whole The study of individual or specific units of economy
- Looking at the "big Picture" Supply and Demand
- Inflation Market Sructure
- Wage low Business organization
- International Trade
Positive Economics (facts) V. Normative Economics (Opinion)
- Attempts to describe the world "as is" Attempts to describe the world as it should be
- Very descriptive in nature "Aught to be"
- Collects and presents facts "should be"
Needs V. Wants
- Basic Requirements for survival Desires of Citizens
Goods V. Service
- Tangible Commodities Work Performed by someone else
- something you can touch
- Capital Goods: Item used in creation of other goods
- Consumer goods: Intended for final consumer
Scarcity V. Shortage
- Fundamental problem all societies face Quantity Demanded Greater than that supplied
- Trying to satisfy unlimited wants w/ limited resources
Factors of Production
- Land
- Labor
- Capital
- Human:Knowledge, skills, Abilities, Talents aquired through education or experience.
- Physical: Tools, Machines, Factories, Robots, Trucks
- Entreprenuership
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