Thinking Like Economist

·       Cost-Benefit Analysis ( decision making) yes or no

·       What is the cost?

·       What is the benefit?

B>C=yes    C>B=no

·       Cost/benefits--- place dollar value

Reservation Price

·       For instance if someone asked you to pick up a trash and offered you some money how much would you do it for? 1,2,3,4,5,6,7,8,9. Then you picked five dollar because you don’t want to do it for less than five dollars  that called reservation price.

Mistakes in making decision

·       Not accounting for opportunity cost

·       Sunk cost or paying regardless of the decision

·       Don’t measure cost/benefit only for dollar amount

·       Understanding (marginal cost = marginal benefit)

Positive Vs Normative Statement

·       Normative statement are (subjective use word like “should”)

·       Positive statement are ( state facts consequences of action)

·       Economic handle positive statement best

Function

For each input there is only one out put

·       Rate of changes

·       Line slope is rise/run ( same rate of change)

·       Slope rate of change depended on the graph

Derivation

·       Review the problem on blackboard

Supply

·       The relationship between quantity of a good that  producers are willing to sell and the price of the good

·       Demand does not have effect on supply

·       When production cost goes down increase in supply

·       If you hold the production line  fix or the same increase in supply

Demand

·       The relationship between the quantity of a good that consumer are willing to buy and the price of the good

·       Price goes down people start purchasing or spending

·       One of the thing that change demand is the price of the good and income

Equilibrium

·       It happens when demand and supply intersect

·       Surplus

·       Shortage

Elasticity Price

·       Price elasticity of demand

·       Perfect Inelasticity and prefect elasticity of demand

·       Constant unit elasticity

·       Cross elasticity of demand

·       Total revenue and elasticity

·       Elasticity of supply