Macroeconomics Notes
Thursday’s 6:00-8:40
Lecture #1: 9/5:
● Chapter 1: What is Economics?
● Scarcity: Not enough to satisfy everyone’s wants
● (Limited Resources) - Scarcity forces us to make decisions
● Economics is the study of efficient allocation of limited resources
● Micro vs. Macro: Microeconomics - the study of decision making by individuals,
firms, and industries. Macroeconomics - the study of broad economic issues at the
aggregate level, such as: total employment, national output, and inflation.
● Key principals: Economic Decisions involve trade offs, examples: “guns and butter”
● A tradeoff is evaluated based on:
○ Opportunity cost: The value of the highest valued alternative that you give up
when you are making the choice
● Net marginal benefit: At the margin means at “one additional” -If I buy this, this is the
tradeoff for what I am doing, and this is what I get back. Benefit has to outweigh costs
○ People respond to incentives
○ Specialization leads to gains for all involved
● Chapter 2: Production and Economic Growth
● 1) Three basic Economic questions
● What goods and services (g and s) are to be produced?
● How are these g and s produced?
● Who will receive these g and s?
● The value of resources: people earn income based on the value of the resources that
they own
● Labor leads to wages
● Owning capital leads to earning interest
● Entrepreneurial skills lead to profits
● Market economy vs. planned economy
● Factors of production (input)
○ Land - includes natural resources
○ Labor - physical and intellectual services of people
○ Capital - all manufactured products that are used in production, (machines,
equipment etc.)
○ Entrepreneurial skills - manage the inputs of production, and take on financial
risk
● Factors of production: Land, labor, capital, entrepreneurial skills. These all lead to the
production method, which then will lead to the output
● Production possibility frontier: show max quantity of goods and services that can be
produced when resources are used fully and efficiently
● Opportunity cost in production - PPF and Economic Growth
● PPF shifts out, and economy grows
,● Land, labor, and capital are all separate categories in factors of production
● A shortage is when there is a large demand for an item, but not enough supply
● A shortage will lead to an increase in the price of items
● An excess is when there is a larger supply for an item, than there is demand for it.
This usually leads to a decrease in price, because the supply is so plentiful
● Equilibrium, is where there is neither a shortage or excess. It is where the demand for
that product, exactly meets the supply
● Scarcity is both a Macro and Micro topic, and can have solutions in both as well
● Economics is a very broad topic and affects us in every facet of our lives
Sapling Notes
● Demand curves will change based on where we are
● An increase in price/decrease in price will directly affect the quantity demanded
● Substitutes, income, and the price of related goods will all affect the demand for a
product
● A person’s income directly affects how much they buy. If someone makes more
money, depending on what the item is, either it will increase the demand for them or
decrease the demand. If someone is unemployed, and can only afford McDonalds,
their demand for McDonalds is high. But then if they suddenly get a job, and can start
affording better food, their demand for McDonalds decreases, and demand for other
goods increases.
● The price of related goods directly affects prices. For example at a supermarket, vs. at
a movie theatre. At a theatre, the demand for soda will be higher than a supermarket,
because not many people will want soda from grocery stores, but having soda and
food at a movie theatre is nice
Lecture #2: 9/12:
● Scarcity is both a macro and micro topic and can have solutions in both as well
● Economics is a very broad topic and affects us in every facet of our lives
● Allocation of resources is a very large topic and both fairness and efficiency are in
play
● Opportunity cost plays into just about everything. For example, economics homework
and business homework. Every minute spent on business homework is one less
minute spent on economics homework. Cost vs benefit is involved with everything in
economics
● Chapter 3: The Market and price system
● Uber is a two sided market. Drivers and riders
● Markets and Exchange: A market is a place or service that enables buyers and sellers
to exchange goods and services
● The buyers (sellers) determine the demand for supply of G & S
● Demand - Quantity demanded vs demand:
, ● The amount of products that people are willing and able to buy during a given amount
of time, at a specific price = quantity demanded, at each possible price it is demand.
● Law of demand: As price increases the quantity demanded falls
● Demand curve: shows an inverse relationship between price and quantity demanded
● For supply and demand curve, supply is on the y axis, and quantity is on the x
● Factors that shift in demand: lifespan, price on substitutes, price on compliments,
expectations.
● There is a change in consumer expectations about when prices will change for certain
goods/services, as well as their tastes and preferences
● For normal goods: demand increases as income rises
● For inferior goods: demand decreases as income rises
● Supply - quantity supplied: the amount of goods and services that producers are
willing and able to offer for sale during a given period of time at a specific price =
quantity supplied. What the producers would offer at each possible price = supply
● Law of supply: as the price of a good rises, producers supply more
● Profit = revenue - production cost
● Supply curve shows a positive relationship between supply and quantity demanded
● Individual supply and market supply: Market supply curve is the horizontal sum of all
individual supply curves
● Change in supply and change in quantity supplied: change in supply shifts the entire
supply curve down
● Change in quantity supplied: means movement along the same supply curve in
response to a price change
● Factors that shift supply: Any factor increasing profits of producers will increase
supply
● Profits increase when the cost of production decreases
● Example: price of resources such as materials/land/operating cost
● Factors that shift supply: any factor increasing profits of producers will increase
supply, improvement in technology, a decrease in taxes, and an increase in
government subsidies
● Profits increase when the cost of production decreases. Example: price or resources
such as materials/land/operating costs
● Price of related commodities: An increase in the profitability of electric cars will
decrease the supply of gas cars
● Equilibrium: Price of related commodities. An increase in profitability of electric cars
will decrease the supply of gas cars. It occurs where quantity demanded and quantity
supplied are equal
● A surplus occurs when quantity supplied is greater than quantity demanded
● A shortage is when quantity demanded is greater than quantity supplied
● Price changes when quantity supplied and demanded are not equal, until they reach
equilibrium price
Thursday’s 6:00-8:40
Lecture #1: 9/5:
● Chapter 1: What is Economics?
● Scarcity: Not enough to satisfy everyone’s wants
● (Limited Resources) - Scarcity forces us to make decisions
● Economics is the study of efficient allocation of limited resources
● Micro vs. Macro: Microeconomics - the study of decision making by individuals,
firms, and industries. Macroeconomics - the study of broad economic issues at the
aggregate level, such as: total employment, national output, and inflation.
● Key principals: Economic Decisions involve trade offs, examples: “guns and butter”
● A tradeoff is evaluated based on:
○ Opportunity cost: The value of the highest valued alternative that you give up
when you are making the choice
● Net marginal benefit: At the margin means at “one additional” -If I buy this, this is the
tradeoff for what I am doing, and this is what I get back. Benefit has to outweigh costs
○ People respond to incentives
○ Specialization leads to gains for all involved
● Chapter 2: Production and Economic Growth
● 1) Three basic Economic questions
● What goods and services (g and s) are to be produced?
● How are these g and s produced?
● Who will receive these g and s?
● The value of resources: people earn income based on the value of the resources that
they own
● Labor leads to wages
● Owning capital leads to earning interest
● Entrepreneurial skills lead to profits
● Market economy vs. planned economy
● Factors of production (input)
○ Land - includes natural resources
○ Labor - physical and intellectual services of people
○ Capital - all manufactured products that are used in production, (machines,
equipment etc.)
○ Entrepreneurial skills - manage the inputs of production, and take on financial
risk
● Factors of production: Land, labor, capital, entrepreneurial skills. These all lead to the
production method, which then will lead to the output
● Production possibility frontier: show max quantity of goods and services that can be
produced when resources are used fully and efficiently
● Opportunity cost in production - PPF and Economic Growth
● PPF shifts out, and economy grows
,● Land, labor, and capital are all separate categories in factors of production
● A shortage is when there is a large demand for an item, but not enough supply
● A shortage will lead to an increase in the price of items
● An excess is when there is a larger supply for an item, than there is demand for it.
This usually leads to a decrease in price, because the supply is so plentiful
● Equilibrium, is where there is neither a shortage or excess. It is where the demand for
that product, exactly meets the supply
● Scarcity is both a Macro and Micro topic, and can have solutions in both as well
● Economics is a very broad topic and affects us in every facet of our lives
Sapling Notes
● Demand curves will change based on where we are
● An increase in price/decrease in price will directly affect the quantity demanded
● Substitutes, income, and the price of related goods will all affect the demand for a
product
● A person’s income directly affects how much they buy. If someone makes more
money, depending on what the item is, either it will increase the demand for them or
decrease the demand. If someone is unemployed, and can only afford McDonalds,
their demand for McDonalds is high. But then if they suddenly get a job, and can start
affording better food, their demand for McDonalds decreases, and demand for other
goods increases.
● The price of related goods directly affects prices. For example at a supermarket, vs. at
a movie theatre. At a theatre, the demand for soda will be higher than a supermarket,
because not many people will want soda from grocery stores, but having soda and
food at a movie theatre is nice
Lecture #2: 9/12:
● Scarcity is both a macro and micro topic and can have solutions in both as well
● Economics is a very broad topic and affects us in every facet of our lives
● Allocation of resources is a very large topic and both fairness and efficiency are in
play
● Opportunity cost plays into just about everything. For example, economics homework
and business homework. Every minute spent on business homework is one less
minute spent on economics homework. Cost vs benefit is involved with everything in
economics
● Chapter 3: The Market and price system
● Uber is a two sided market. Drivers and riders
● Markets and Exchange: A market is a place or service that enables buyers and sellers
to exchange goods and services
● The buyers (sellers) determine the demand for supply of G & S
● Demand - Quantity demanded vs demand:
, ● The amount of products that people are willing and able to buy during a given amount
of time, at a specific price = quantity demanded, at each possible price it is demand.
● Law of demand: As price increases the quantity demanded falls
● Demand curve: shows an inverse relationship between price and quantity demanded
● For supply and demand curve, supply is on the y axis, and quantity is on the x
● Factors that shift in demand: lifespan, price on substitutes, price on compliments,
expectations.
● There is a change in consumer expectations about when prices will change for certain
goods/services, as well as their tastes and preferences
● For normal goods: demand increases as income rises
● For inferior goods: demand decreases as income rises
● Supply - quantity supplied: the amount of goods and services that producers are
willing and able to offer for sale during a given period of time at a specific price =
quantity supplied. What the producers would offer at each possible price = supply
● Law of supply: as the price of a good rises, producers supply more
● Profit = revenue - production cost
● Supply curve shows a positive relationship between supply and quantity demanded
● Individual supply and market supply: Market supply curve is the horizontal sum of all
individual supply curves
● Change in supply and change in quantity supplied: change in supply shifts the entire
supply curve down
● Change in quantity supplied: means movement along the same supply curve in
response to a price change
● Factors that shift supply: Any factor increasing profits of producers will increase
supply
● Profits increase when the cost of production decreases
● Example: price of resources such as materials/land/operating cost
● Factors that shift supply: any factor increasing profits of producers will increase
supply, improvement in technology, a decrease in taxes, and an increase in
government subsidies
● Profits increase when the cost of production decreases. Example: price or resources
such as materials/land/operating costs
● Price of related commodities: An increase in the profitability of electric cars will
decrease the supply of gas cars
● Equilibrium: Price of related commodities. An increase in profitability of electric cars
will decrease the supply of gas cars. It occurs where quantity demanded and quantity
supplied are equal
● A surplus occurs when quantity supplied is greater than quantity demanded
● A shortage is when quantity demanded is greater than quantity supplied
● Price changes when quantity supplied and demanded are not equal, until they reach
equilibrium price
