Substitution effect
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The higher the price of one good, the more likely you are to buy another
good instead
10 Principles of Economics
Principle 10
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, Society faces a short run tradeoff between inflation and unemployment. (in
the short run, many economic policies push inflation and unemployment in
opposite directions)
Scarcity
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the basic economic problem, the gap between limited - that is, scarce -
resources and theoretically limitless wants.
If both Supply and Demand curves shift...
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the direction of the effect on one of the two (p or q) is clear, the other is
ambiguous
Demand and Supply: A model of a competitive market
Demand
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, The relationship between quantity of a good that consumer are willing and
able to buy at its price, holding constant all other factors that influence it.
Demand is the relationship, Quantity demanded is a number
The Circular-Flow Diagram
Households
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Own the factors of production and sell/rent them to firms for income
Buy and consume goods and services
Law of demand
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downward sloping demand
people buy more of something when the price is lower
Year, nominal GDP, GDP deflator
1975, $3000, 120
1976, $3750, 150
From 1975 to 1976,
a. inflation was 25% and real GDP grew.
b. inflation was 50% and real GDP did not grow.
, c. inflation was 25% and real GDP did not grow.
d. inflation was 50% and real GDP grew.
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c. inflation was 25% and real GDP did not grow.
Demand and Supply: A model of a competitive market
Market
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a group of buyers and sellers exchanging a particular good or service
An In Depth Look Into GDP Definition:
"produced in a country"
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Distinguish from GNP
Slope
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Rise/Run
or
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The higher the price of one good, the more likely you are to buy another
good instead
10 Principles of Economics
Principle 10
Give this one a try later!
, Society faces a short run tradeoff between inflation and unemployment. (in
the short run, many economic policies push inflation and unemployment in
opposite directions)
Scarcity
Give this one a try later!
the basic economic problem, the gap between limited - that is, scarce -
resources and theoretically limitless wants.
If both Supply and Demand curves shift...
Give this one a try later!
the direction of the effect on one of the two (p or q) is clear, the other is
ambiguous
Demand and Supply: A model of a competitive market
Demand
Give this one a try later!
, The relationship between quantity of a good that consumer are willing and
able to buy at its price, holding constant all other factors that influence it.
Demand is the relationship, Quantity demanded is a number
The Circular-Flow Diagram
Households
Give this one a try later!
Own the factors of production and sell/rent them to firms for income
Buy and consume goods and services
Law of demand
Give this one a try later!
downward sloping demand
people buy more of something when the price is lower
Year, nominal GDP, GDP deflator
1975, $3000, 120
1976, $3750, 150
From 1975 to 1976,
a. inflation was 25% and real GDP grew.
b. inflation was 50% and real GDP did not grow.
, c. inflation was 25% and real GDP did not grow.
d. inflation was 50% and real GDP grew.
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c. inflation was 25% and real GDP did not grow.
Demand and Supply: A model of a competitive market
Market
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a group of buyers and sellers exchanging a particular good or service
An In Depth Look Into GDP Definition:
"produced in a country"
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Distinguish from GNP
Slope
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Rise/Run
or
