Economics summary
microeconomics = concerned with the economy at the individual level, the actions of firms
and households.
macroeconomics = analyses the operation of the whole economy. Growth: unemployment,
inflation, exchange rates.
positive statement: based on facts. for example, Donald Trump is president of the USA.
normative statement: based on opinions, for example, Donald Trump is the best president
the USA has ever had.
economics is the study of how society manages its resources.
the economic problem: scarcity, choice and opportunity cost.
- we have wants in terms of our desire for food, clothing, consumer goods, etc
- → The problem is that our wants exceed our resources (same for firms &
governments)
- → this forces us to make choices, these choices are measured in terms of
opportunity costs.
microeconomic issues
- decisions involve tradeoffs: involves a sacrifice that must be made to get a certain
product or experience. e.g. pollution, job or college
- MC < MB → do more (marginal costs and marginal benefits)
- MC > MB → do less
what do economists study?
the production possibility curve
- what the curve shows
- microeconomics and the production
possibility curve:
● choices and opportunity cost
● increasing opportunity cost
- macroeconomics and the production
possibility curve:
● production with the curve
● shifts in the curve
lecture 2:
importance of supply & demand in the market economy
- they determine the quantity of each good.
- the price
- the allocation of the economy´s scarce resources
- can be used to predict the impacts on the economy of various events and policies.
the law of demand → Ceteris Paribus (all other things staying the same) P ⇡ - Q
⇣ P ⇣ - Q⇡
, Determinants of demand (beïnvloed de vraag)
- price - income and substitution effect (substitueerbare producten)
- price of other goods / services (substitute and complementary goods)
- income
● normal: Y⇡ - D →
● luxury: Y⇡ - D --->
● inferior: Y⇡ - D ←
- tastes / fashions
- expectations
the law of supply (aanbod) → P⇡ - Q⇡ P⇣ - Q⇣
Determinants of supply:
- price of the good
- cost of production
- price of other goods / services
- changes in technology
- taxes and subsidies
- external factors
Supply = C + dP
d = slope
C = where the line crossed
P = price C
D
P surplus
E
Equilibrium (marktevenwicht)
shortage
0 Q
Demand is the desire, willingness and ability to buy a good or service.
we buy products for their utility: the pleasure, usefulness, or satisfaction they give us.
demand curves can shift in response to the following factors:
- Buyers: changes in the number of consumers
- Income: changes in consumers income
- Tastes: changes in preference or popularity of product/service
- Expectations: changes in what consumers expect to happen in the future
- Related goods: compliments and substitutes
BITER: factors that shift the demand curve
microeconomics = concerned with the economy at the individual level, the actions of firms
and households.
macroeconomics = analyses the operation of the whole economy. Growth: unemployment,
inflation, exchange rates.
positive statement: based on facts. for example, Donald Trump is president of the USA.
normative statement: based on opinions, for example, Donald Trump is the best president
the USA has ever had.
economics is the study of how society manages its resources.
the economic problem: scarcity, choice and opportunity cost.
- we have wants in terms of our desire for food, clothing, consumer goods, etc
- → The problem is that our wants exceed our resources (same for firms &
governments)
- → this forces us to make choices, these choices are measured in terms of
opportunity costs.
microeconomic issues
- decisions involve tradeoffs: involves a sacrifice that must be made to get a certain
product or experience. e.g. pollution, job or college
- MC < MB → do more (marginal costs and marginal benefits)
- MC > MB → do less
what do economists study?
the production possibility curve
- what the curve shows
- microeconomics and the production
possibility curve:
● choices and opportunity cost
● increasing opportunity cost
- macroeconomics and the production
possibility curve:
● production with the curve
● shifts in the curve
lecture 2:
importance of supply & demand in the market economy
- they determine the quantity of each good.
- the price
- the allocation of the economy´s scarce resources
- can be used to predict the impacts on the economy of various events and policies.
the law of demand → Ceteris Paribus (all other things staying the same) P ⇡ - Q
⇣ P ⇣ - Q⇡
, Determinants of demand (beïnvloed de vraag)
- price - income and substitution effect (substitueerbare producten)
- price of other goods / services (substitute and complementary goods)
- income
● normal: Y⇡ - D →
● luxury: Y⇡ - D --->
● inferior: Y⇡ - D ←
- tastes / fashions
- expectations
the law of supply (aanbod) → P⇡ - Q⇡ P⇣ - Q⇣
Determinants of supply:
- price of the good
- cost of production
- price of other goods / services
- changes in technology
- taxes and subsidies
- external factors
Supply = C + dP
d = slope
C = where the line crossed
P = price C
D
P surplus
E
Equilibrium (marktevenwicht)
shortage
0 Q
Demand is the desire, willingness and ability to buy a good or service.
we buy products for their utility: the pleasure, usefulness, or satisfaction they give us.
demand curves can shift in response to the following factors:
- Buyers: changes in the number of consumers
- Income: changes in consumers income
- Tastes: changes in preference or popularity of product/service
- Expectations: changes in what consumers expect to happen in the future
- Related goods: compliments and substitutes
BITER: factors that shift the demand curve
