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| efficient allocation of scarce resources |
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| study of how individuals make decisions and how those decisions interact |
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| the resources needed to produce goods or services. ex. labor/capital |
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| deals w/ scarcity. points that show the max combinations of 2 goods scarcity can produce given fixed resources/technology |
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-2 goods -fixed resources/ technology
-full employment -full efficiency -fixed period of time -no $value |
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| demonstrates law of increasing opportunity cost because all inputs are not substitutible |
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| value of the best available alternative. what you give up to get/do something. |
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| law of increasing opportunity cost |
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| as you produce equal extra amounts of one good, society must give up or sacrifice ever increasing amounts of the other good. this is why the curve is bowed outward and is not straight |
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| relationship between quantity consumers are willing and able to buy at various and possible prices |
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| point to point movement along single demand curve. just price changes |
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| shift of entire curve. right=increase left=decrease |
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| point to point movement along single supply curve |
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| shift of entire curve. right=increase left=decrease |
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| -tastes/preferences(input) -consumer income(inferior/normal) -price of related good(subs/compliment) -demographics(growing/shrinking) -future expectations(good/bad) |
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-cost of inputs -technology(improving/obsolete)
-price of related goods(subs/compli)
-size of industry/market(growing/shrinking)
-future expectations(good/bad)
-business taxes/subsidies
-mother nature |
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| price is too high so its a |
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| can lead to economic surpluses. minimum price along equilibrium. |
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| can lead to shortages. max price below equillibrium |
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| measure of the responsiveness or sensitivity to Qd to change in price |
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-lots of subs
-big ticket item
-luxuries
-longer period of time |
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| demand is inelastic when? |
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-few or no subs
-small ticket item
-neccesity
-in short run |
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| meaure of the responsiveness or sensitivity of Qs to change in P |
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| companies split the stock. markets split the price |
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| selling price-purchase price |
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| ppl who think market will go up/down |
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| interest rate that the largest commercial banks charge best corporate customers |
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| interest rate the FED charges banks when they need money and borrow from it.(.5% all semester) |
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| (.17%) interest rate banks charge other banks for overnight loan of $1,000,000 or more. |
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| when does dollar depreciate against foreign currency |
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| when $1 buys fewer units of the foreign currency and when you pay more $ for one unit of the foreign currency |
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| what is gold quoted in compared to everything else |
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| gold quoted in $ everything else quoted in cents |
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| did the portfolio make money |
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| stablilization/fiscal policy |
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| changes in gov spending or tax in order to change unemployment or inflation |
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| changes to money supply to change unemployment or inflation |
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| form of gov with more than one level(state/local/national) |
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| fica, income, soc sec. used for medicare,defense,grants |
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| income,sales used for education,highways,police |
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| real estate, sales, income used for education,police/fire, highways,parks,water/sewer |
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| % gets larger as income gets larger(income) |
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| gets smaller as income gets larger. (soc sec) |
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| progressive, flat, regressive |
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ability to pay-progressive
benefits principle-if you didnt use it you dont have to pay(property,water,tolls) |
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| sacrifice that must be made in order to acquire something |
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| total rev-accounting costs |
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| law of diminishing marginal returns |
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| as you add equal extra amounts of a variable input to existing fixed inputs, total output will increase until eventually the extra output diminishes as more of the variable input is added. |
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-specialiation of resources
-automate
-become important consumer to supplies(volume discounts)
-as you get bigger you sell waste(biproducts)
-growth of auxillary facilities (horizontal vs vertical integration. own inputs/transportation/retailers/wholesalers)
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-bueracracy(by the time decisions are made its too late)
-such a big buyer you are now driving up the input costs(engineers are expensive for chem plants in middle of nowhere) |
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-dont need alot of money to get started
-diversified
-capital gain/loss distribution |
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| pay fee when buy share of the mutual fund |
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| pay fee when selling mutual fund |
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| income distribution(mutual funds) |
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| dividens/interest payments |
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-not a single buyer or seller
-product is homogeneous(all the same)
-perfect info(can research prices/comp)
-freedom of entry/exit
-must sell at market price |
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| where do you produce at (perf comp) |
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| where tan line of TC is parrallel to TR |
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| Profit maximizing rule(perf comp) |
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| marg rev=demand=avg rev=price |
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| shut down point(perf comp) |
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| if price is less than AVC |
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| outline of events for LR equil(perf comp) |
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Definition
1. firm makes econ prof
2. econ prof entices new firms to enter
3. more firms enter. profits narrowed
4. as firms shut down market supply shifts left until p=min of atc of firm(econ prof =0 because it has been competed away) |
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-barriers to enter(patent, license, resources ex intelligence/inputs)
-one firm in reasonable market area
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| why are there econ prof in lr for monopolies |
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| no one comes in and competes them away |
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| why are pure monopolies no good for consumers |
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| if they were broken up the price would be lower |
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| imperfect/monopolistic competition |
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-brand loyalty = mini monopoly
-non homogenous(heterogeneous) products (diff thru producers)
- advertising is a neccesity
-weak barriers to entry |
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| mr=mc but p=atc but not at min |
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-homo or hetero product(oil/cars)
-barriers to entry(econ of scale, brand loyalty, scarcity of resources, licenses) |
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| mathematical equation to reach equillibrium |
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| kink to demand curve theory |
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| everyone will follow if you lower but not higher prices |
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| price leadership(tacit collusion) |
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| firm that can survive price war sets the price(saudi arabia in opec) |
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| It is an agreement among firms to divide the market, set prices, or limit production. (opec)(mafia) |
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| mid east asked for money in dollars so they could buy things internationally |
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-rampant cheating(quotas, produced more)
-demand curves became elastic in LR
-mexico discovered oil(didnt join opec) |
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-yom kippur oil embargo(didnt ship oil to us resulted in inflation)
-inelastic demand for oil |
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| law of comparative advantage |
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| david ricardo- the country with the lowest opp cost should produce the good in question. the end result is the world output goes up(gains from trade) |
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| examples of trade barriers |
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-tariffs
-quotas
-embargoes
-voluntary restraint agreements
-export subsidies or dumping
-regulations(epa, osha, safety)
-nationalistic appeals |
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| contract agree on today on price you pay in future for commodity. |
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| you can back out of the contract before experiration date |
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| underneath commodity. you buy contract to buy commodity |
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| spot market. buy today receive today at today's price |
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| deciding today on price/quantity of transaction in future |
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| person who sells/buys commodity in futures market. they are either producers or consumers. in market to avoid bad risk in bad prices on future |
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| not a consumer or producer just buys and sells contracts.never wants possession of commodity even though they have a sell contract. buy contracts like gambling. buys/sells to make profits |
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| designed in 1935 as each person has own pot with name on it and as you put money into it money flows into it. 1939-pay as you go. one big pot. paid out to retired, disabled, surviving. medicare was later added. now a sep pot from soc sec |
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federal program. 2.9% of check.
-old(65+)
-disabled |
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-state system
-have to be poor(income/assets)
-disabled(short term) |
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| major probs with health care |
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-lots of uninsured
-escalading costs(conflict of interests ex. lawyers vs doctors vs insurance companies) |
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| difference inbetween next level of TC |
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| difference between next levels of TR |
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| the satisfaction derived from consuming a good or service |
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| the largest sum of money a soncumer will voluntarily give up in exchange |
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| additional utility or satisfaction derived from consuming one more unit of any good or service |
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| law of diminishing marginal utility |
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Definition
| as you consume more of a good or service, your total utility increases. however, it grows at a slower rate because the extra utility added by the last unit consumed of a good diminishes as more of the good is consumed. |
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| law of equal marginal utilities per dollar |
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Definition
| each good or service is demanded up to the point where the marginal utility per dollar is exactly equal to the marginal utility per dollar of any other good or service |
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| the gap between the total utility of a good or service and its total market value. the surplus arises because we receive more utility than we pay for. we pay for all the units what the last unit is worth because we pay the same price for each unit. The MU of the earlier units is higher than the later units. |
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| consumer surplus(located) |
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| area under the demand curve and above the price line |
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