Economics
What is economics?: partly a hard science (about moving material around), and a
social science (it depends on human behaviour);
What is wealth?: 1. Store value
2. Collective for a society to get things done
What is a market?: the fundamental meeting point of S and D, it involves all
transactions with money.
Microeconomics components: it looks at the poverty of the individual, firm,
industry, or market. One at a time.
Macroeconomics components: it looks at the general indicators of the health of the
economy.
MODELS AND GRAPHS
Modeling : isolates a few variables from reality to see if they are related. In most
basic models Y depends on X.
Slopes of a line: change in Y/ change in X =>
represents elasticity
Extreme slope = 100Y for every X, moves towards
∞ and then 0
Straight = constant , curve = changing
Models
Production possibility frontier:
- The slope of the line makes a difference
- The slope tells you how many Y you need to
trade for each X
Comparative advantage:
A country has comparative advantage when its
opportunity cost is lower than its trading partner’s.
Elasticity
it shows how much D falls for every change in P
Shifts in D curve happen because of
-Elasticity: associated with
change in :
luxuries
- The P of related G&S
-Inelasticity: associated with
- Income
necessities
- Number of consumers
- Expectation
- Taste or preferences
, The demand curve:
- Q demandas depend on P , it shows a negative relationship btwn Q and P
- Demand is inelastic
- It’s usually curved since Q demanded does not change evenly
Law of demand: P rises, the Q demanded falls.
Shifts in supply curve happen bcs in
Supply curve : change in:
- Positive slope, as P goes up, Q goes - Input prices
up. - Technology
- Suppliers supply more (Q) as P - Num of producers
increases. - In expectations
- In P of related prices
Surplus: excess product not being sold
From surplus to equilibrium: surplus offers an incentive for those frustrated would
be sellers to offer a lower P.
Consumer surplus : those at the high end of the D curve receive a ‘bonus’ bcs
they would have bought at a higher P.
MEDDLING WITH MARKETS
- Markets are away of doing negotiation which maxes efficiency. They operate by
transferring info and goods -> price signals.
- They enable all people to access regardless of status
There are many ways markets can be impacted by policy :
- gov regularly mandate price ceilings: this type of policy usually lead to black markets flourish and other major disturbances .
Price control :
effects of price ceiling
- Reduces Q of products being sold below the efficiency
- Leads to wasted time and efforts
- Typically lead to inefficient allocation
- Rise to illegal behaviour
Inefficiencies :
- Low Q supplier want S if the P you receive is not worth the opportunity cost
- The cost outweighs the benefits
- Misallocation
- Wasted time/effort
- Low quality
Black markets:
- Illegal activity leads to break down
- Honest people now at a disadvantage
What is economics?: partly a hard science (about moving material around), and a
social science (it depends on human behaviour);
What is wealth?: 1. Store value
2. Collective for a society to get things done
What is a market?: the fundamental meeting point of S and D, it involves all
transactions with money.
Microeconomics components: it looks at the poverty of the individual, firm,
industry, or market. One at a time.
Macroeconomics components: it looks at the general indicators of the health of the
economy.
MODELS AND GRAPHS
Modeling : isolates a few variables from reality to see if they are related. In most
basic models Y depends on X.
Slopes of a line: change in Y/ change in X =>
represents elasticity
Extreme slope = 100Y for every X, moves towards
∞ and then 0
Straight = constant , curve = changing
Models
Production possibility frontier:
- The slope of the line makes a difference
- The slope tells you how many Y you need to
trade for each X
Comparative advantage:
A country has comparative advantage when its
opportunity cost is lower than its trading partner’s.
Elasticity
it shows how much D falls for every change in P
Shifts in D curve happen because of
-Elasticity: associated with
change in :
luxuries
- The P of related G&S
-Inelasticity: associated with
- Income
necessities
- Number of consumers
- Expectation
- Taste or preferences
, The demand curve:
- Q demandas depend on P , it shows a negative relationship btwn Q and P
- Demand is inelastic
- It’s usually curved since Q demanded does not change evenly
Law of demand: P rises, the Q demanded falls.
Shifts in supply curve happen bcs in
Supply curve : change in:
- Positive slope, as P goes up, Q goes - Input prices
up. - Technology
- Suppliers supply more (Q) as P - Num of producers
increases. - In expectations
- In P of related prices
Surplus: excess product not being sold
From surplus to equilibrium: surplus offers an incentive for those frustrated would
be sellers to offer a lower P.
Consumer surplus : those at the high end of the D curve receive a ‘bonus’ bcs
they would have bought at a higher P.
MEDDLING WITH MARKETS
- Markets are away of doing negotiation which maxes efficiency. They operate by
transferring info and goods -> price signals.
- They enable all people to access regardless of status
There are many ways markets can be impacted by policy :
- gov regularly mandate price ceilings: this type of policy usually lead to black markets flourish and other major disturbances .
Price control :
effects of price ceiling
- Reduces Q of products being sold below the efficiency
- Leads to wasted time and efforts
- Typically lead to inefficient allocation
- Rise to illegal behaviour
Inefficiencies :
- Low Q supplier want S if the P you receive is not worth the opportunity cost
- The cost outweighs the benefits
- Misallocation
- Wasted time/effort
- Low quality
Black markets:
- Illegal activity leads to break down
- Honest people now at a disadvantage
