Princibles of economics

Factors effecting demand

p = own prices (-)

pc = price of compliemntay (-)

ps = price of subtitute (+)

Y = income (+)

N = population size (+)

FACtors effecting supply

p = price (+)

Pe = future expected price (-)

ri = cost of producation (-)

T = rate of technology (+)

what is price elasticity of demand and the eq

sensetivity of Qd as P changes

Ed = % CHANGE IN Qd / % CHANGE IN P

Ed is always negative since if Price increases the Qd will always decrease

how to find % change in anything

change in X / original X

Types of Ed and Es

Ed = 0 ( perfectly inelastic, as price changes Qd stays exactly the same)

-1 < Ed < 0 ( inelastic demand, as price changes, Qd hardly chnages)

Ed = -1 ( unitary elastic demand, if price changes by X5, Qd changes by exact same %)

infinity < Ed < -1 (elastic demand, % change in demand is larger than % change in price)

Ed = - infinity (perfectly elastic demand, any change in price will cause Qd to be zero)

FOR Es, FLIP THE SIGN, THE NAMES ARE THE SAME.

income elasticiyy of demand eq and numbers meanings

Ey = %change in Qd/ %change in Income

Ey > 1, luxury good

0 < Ey < 1, normal nessesity

Ey < 0, inferior

Criss price elasticity fo demand eq and numbers meaning

Ec: %change in Qd of good x / % chamge in price of good y

If Ec is postive: substitute, since if price of coffe (y) increases, Qd of tea (x) will increase

Ec is negative: complimentary, since if the price of ink (y) increases, Qd for printers (x) decreases

Ec = 0, no relation

what is Es

the measure of sensitivity of the Qs of a good to changes in its own price

Es = %change in Qs / % change in price

Es is always positive since +VE between price and Qs

Es = 0 ( perfectly inelastic, as price changes Qd stays exactly the same)

-1 > Es >0 ( inelastic supply, as price changes, Qd hardly chnages)

Es = 1 ( unitary elastic supply, if price changes by X5, Qd changes by exact same %)

infinity > Es> 1 (elastic supply, % change in demand is larger than % change in price)

Es = infinity (perfectly elastic supply, any change in price will cause Qd to be zero)

what is cardinal and ordinal utility

cardinal: does both, gives info on what order the baskets are ranked at, and how much utility is gained from each basket

ordinal: only gives info abt order in which consumer ranks there basket

cardinal utility apraoch of Mu and Tu

TU : total utility, cumalating Mu

MU: marginal utility, extra utility gained from consuming an extra unit of good

what does this mean

Eq quantaties are: X1 = 6 and X2 = 4

Mu1 = Mu2 =Mum

𝑻𝑼𝑴𝒂𝒙 = 𝑻𝑼𝟏 𝒂𝒕 𝟔 + 𝑻𝑼𝟐 𝒂𝒕 𝟒

𝑻𝑼𝑴𝒂𝒙 = 𝟐𝟗𝟓 + 𝟏𝟎𝟔 = 𝟒𝟎𝟏

what is an indifferance curve and what are there rules

line showing all the combinations of two goods that give a consumer the same level of ](utility).

1) always slope down, since a shift means that consumpotion of 1 increases and another decreases

2)cant intercept, since differant lines show differnat lvls of utility, so if itercepted, 2 same combos of good have same utility which isnt posssible

3)cant be thick

4)slope is negative