ECON

Needs

stay the same

Wants

are endless and always changing

Resources

Labor, Capital, Technology,

Economics

The study of how we satisfy our needs and wants with scare resources

Labor

mind and muscle, the human aspect

Capital Resources

natuarl and man-made (go into production)

Technology

means and methods for combining resources to provide goods and services

Scarcity

forces our society to make decisions about how to use resources

Gross Domestic Product

The market value of all final goods and services produced within an economy (countries borders) during a specific time period

Gross Domestic Product

Consumption + Government + Gross Investment + Net Exports - Imports

PPC

shows scarcity

PPC

Resources are fixed, all resources are fully employed, only two things can be produced, technology is fixed

PPC’s

slope downward as it shows tradeoff

PPC shows

opportunity cost of each choice

Bow

shows increasing opportunity cost

Straight

represent contant opportunity cost

Economic Growth

When real GDP and the PPC moves out

Causes of poverty and requisites of economic growth

Quality of labor force, stock of capital and capital accumulation, technology, efficiency, population, inability to adapt to modern techniques

Pure Market Economy

Private property rights, decentralized decision making coordinated through markets

Pure Command Economy

State ownership and/or control of economic resources, centralized planning

Purely Competitive Market

Large number of buyers and sellers

Each seller offers standardized product

Product prices free to move up or down

Buyer and seller must be mobile

Freedom of entry and exit

Purely Monopolistic

One seller

Can block competition

Consumer suffers from high prices

Imperfectly Competitive Markets

Oligopoly and monopolistic competition

Price is a function of quantity demanded or quantity supplied

Price changed

Shortcoming of central planning

Informational requirements

Incentives for efficient production

Heavy industry verses consumer goods

Price Floor

Surplus

Price Ceiling

Shortage

Labor Market

Demand for labor is downward sloping, the cheaper the labor is, the more the market will demand labor hours

Marginal product of labor

the increase in output due to hiring another unit of labor (price)

Marginal product of labor

Increase in revenue due to hiring one additional unit of labor

Rent control effects

they don’t always need it and creates black markets

other apartments without rent control prices will be higher

can for some to commute

increase in search costs for those looking for an apartment

Labor Market

the market for labor is derived from demand for the product being produced

the cheaper labor is, the more market will demand labor hours

demand for labor is downward sloping

Diminishing returns

“too many cooks in the kitchen”

Overspecialization

Not enough capital

Income effect

higher wages go the more leisure one will want

A price ceiling set below the free market equilibrium price in the market for a hood required which of the following

Some other systems to allocate the resources

Law of supply

idea ther is a direct relationship between quantity and supply

Law of demand

an increase price, makes a decrease in quantity demanded, inverse relationship