Principles of Microeconomics

If marginal benefit is GREATER THAN or EQUAL TO marginal cost...

DO it

If marginal benefit is LESS THAN marginal cost...

DON'T do it

What is the opportunity cost of a straight line possibilites production curve (PPC)?

Constant opportunity cost

The slope is...

Opportunity cost per unit

Point OUTSIDE curve is...

unattainable

Any point ON the curve is...

efficient

Point INSIDE the curve is...

inefficient, not efficiently using resources

The buyers are the...

demanders

The Law of Demand

There is a negative or inverse relationship between price and the quantity demanded

The demand shows...

The most the buyers are willing and able to pay for a given quantity

Does price change demand?

NO, price DOES NOT change demand

Rightward shift is...

Increase

Leftward shift is...

Decrease

Quantity Demand is...

Quantity demand is how much consumers would want at one possible price

What does demand do?

It is the entire curve, it is how much consumers want at all possible prices.

Normal good

An everyday product (example: steak)

If you have MORE money, you want to buy more or less normal good?

More money=want to buy MORE normal good

If you have LESS money, you want to buy more or less normal good?

Less money=want to buy LESS normal good

Inferior good

A lower quality product, a cheaper product people buy if can't afford a nicer product

Do number of buyers change demand?

Yes, number of buyers change demand

Subsitutes

Goods that can replace other goods, used as a subsitute (Example: Starbucks & Dunkin Donutes)

Complements

Goods that are consumed together (Example: Coffee & Sugar)

The 3 Invisible Economic Forces are...

The Invisible Hand, The Invisible Handshake, & The Invisible Foot

The Invisible Hand

The more people buy something, the higher the price would be (Explanation: businesses want what's more profitable, hence the more people want something, the higher the price would be)

The Invisible Handshake

Social & Historical force, some goods are produced due to culture

The Invisible Foot

Political & Legal Forces. The government can control production of certain goods.

Is price ABOVE equilibrium a surplus or a shortage?

Price above equilibrium is a surplus

Is price BELOW equilibrium a surplus or a shortage?

Price below equilibrium is a shortage

Increased Demand = ?Price, ?Quantity

Increased Demand = INCREASED Price, INCREASED Quantity

Decreased Demand= ?Price, ?Quantity

Decreased Demand= DECREASED Price, DECREASED Quantity

Supply

A positive or direct relationship between the price and quantity supplied, shown through an upward slope

Increased Supply = ?Price, ?Quantity

Increased Supply = DECREASED Price, INCREASED Quantity

Decreased Supply = ?Price, ?Quantity

Decreased Supply = INCREASED Price, DECREASED Quantity

The Supply Curve shows...

The lowest price businesses need to produce a given quantity

Supply is based on...

Supply is based on marginal cost

At a higher price, businesses will produce less or more quantity?

At a higher price, businesses will produce MORE quantity.

Raising the cost of production, causes more or less supply?

Raising the cost of production, the business would be LESS able to supply.