False,

scarcity is pre existing

condition= can never be eliminated

unconditional want

-no substitute

conditional

-under certain conditions you could do without

being at the review session tonight imposes a cost

-you could do something else with time and money

1. what will be produced?

2. How will it be produced?

3. For whom will it be produced?

statement can't necessarily be proven right or wrong

SHOULD

graphically illustration of maximum combinations of 2 goods that an economy can produce

-given available resources and technology

Production possibility curve

SHIFTERS

(economic growth)

(outward shift)

gain additional resources

-better workers

-superior technology

(inward shift)

reduction in economy's output

-war

-physical devastation

opportunity costs increase as more of the good is produced

-resources aren't completely adaptable to alternative users

good that can assume the place of another & serve a similar function

coke-pepsi

toyota-ford

good/ services that are generally consumed together

-peanut butter and jelly

-cookies and milk

price increases people more willing to purchase a cheaper alternative

(brand name vs. genetic)

as income ($) increases an individual will purchase more (normal) goods

normal= name brand

as individual receives more and more of a good, each additional unit decreases in value

think water- very thirsty and 1st glass vs. 20th

determinants of demand

1. income/ wealth

everyone gets a $10,000 stimulus check 

MARKET: Consumer Spending

graph:

determinants of demand

1. income/ wealth

everyone gets a $10,000 stimulus check

MARKET: Sun Tran

graph:

determinants of demand

2. consumer tastes/ preferences

polluting is no longer the hip thing to do

MARKET: hybrid vehicles

graph:

there is a 20% decrease (down) in UA students

MARKET: Parking spaces

graph:

determinants of demand

4. prices of related products

the price of pepsi increases

MARKET: coca cola

graph:

the price of milk increases 

MARKET: Cookies

graph:

consumers expect prices of gas to decrease

MARKET: gasoline

graph:

determinants of demand

6. consumer's expectations about future income

consumer expects to get a raise

MARKET: iPods

graph:

law of supply:

as price increases

law of supply

as price decreases

determinants of supply

1. prices of inputs/ costs of production

price of steel goes up

MARKET: US Cars

graph:

determinants of supply

2. technology

robots are used in US car production

MARKET: US Cars

graph:

determinants of supply

3. price of related goods in production

jointly produced goods

price of beef degreases

MARKET: leather

graph:

determinants of supply

3. price of related goods in production

substitutes in production

price of wheat increases

MARKET: Corn

graph:

determinants of supply

4. number of suppliers

circuit city goes bankrupt

MARKET: Consumer electronics

graph:

determinants of supply

5. seller's expectations about future prices

best buy expect prices of their computer to increase

MARKET: marker for computers

graph:

gas becomes more expensive

MARKET: US Cars

fewer companies produce US cars

MARKET: US Cars

bus transportation becomes more expensive

MARKET: US Cars

Review Q: 

When personal computers were first introduced in the 1980's, their price exceeded $5,000.  Since then, the price has decreased dramatically. Use supply & demand analysis to explain the price reduction of computers.  What effect did the price reduction have on the quantity of computers demanded?

Review Q:

Graph and explain how the following even will affect the market for steel produced in the US.  Show on a graph which curve is affected, which direction it changes, and the effects on price and quantity exchanged.

a) US auto sales increase sharply

an artificial limit on how high an item or service can be priced

-rent control

-gasoline price controls

an artificial limmit on how long an item or service can be priced

-agriculture subsidies

-minimum wage

rent control:

who gains? who loses?

the people that rent control (price ceiling) is supposed to help- the poor- are usually harmed

cuz:

if price doesn't determine who will be able to rent the apartment other criteria develop based on discriminatory factors (age, race)

minimum wage:

who gains? who loses?

a minimum wage artificially increases an individual's productivity of labor.  this results in a surplus of workers- a glut of individuals who would be paid more than their labor is worth

-also introduced discrimination since employers can pick and choose who they want

need a way to ration scarce goods; if not price, then other ways develop

(coupons, first come first served)

has to be a way to decide who gets what

considered "luxury goods"

a change in price has a dramatic effect on the quantity supplied or demanded

(food)

considered "necessity"

changed in price will rarely, or only modestly affect the quantity demanded or supplied

(organic food)

ED= (% change quantity demanded)/ (% change in price)

determinants:

1. availability of substitutes

2. habit (brand loyalty)

3. % of income spend on product

4. time for market to adjust

TR= price * quantity

change in TR depends on elasticity