Economics: Efficiency

Efficiency: the ability to accomplish a task with minimum wasted effort or resources, often measured in terms of productivity and time management. (Can I make the situation better for one without making it worse for the other? If yes, the last situation was no efficient.)

Opportunity cost = Trade off. (Give something to get something)

Four Resources:

  • LAND

  • CAPITAL

  • LABOR

  • DIGITAL??

In FACTOR markets, firms buy, households sell.

In Goods/Service markets, firms sell, households buy.

Positive Economics: economic analysis that describes the way the economy ACTUALLY works. (Description) “Tuiiton at HU is $65,000.”

Normative economics: analysis on how the economy SHOULD work. (Prescription) “Tuition at HU should be lower.”

Demand curve shows quantity demanded at various prices.

The quantity demanded is the quantity that buyers are willing and able to buy at a particular price.

LAW OF DEMAND: HIGHER PRICES LEADS TO LESS DEMAND.

Higher gas price = lower quantity of natural gas demanded

A rightward shift in demand curve = increase in demand. to da right to da right

Change in price = change in quantity demanded

Five Factors that shift demand curve:

  • Changes in the Price of Related Goods and Service

    • Substitute goods: Two goods are substitutes if an increase in price for one leads to a increase in demand for the other. (Coke and Pepsi, Nike and Adidas)

    • Complementary goods: Two goods are complimentary if the price of one increases and the price of the other increases and vice versa

  • Changes in Income

    • Normal good: Demand increases when income increases (luxury car) (steak house)

    • Inferior good: Demand decreases when income increases (regular car) (fast food)

  • Changes in Tastes

    • Tastes and preferences are subjective, varying among customers.

    • We can predict seasonal changes in taste and their effect of demand. (Demand for winter coats will increase in the fall)

  • Changes in Expectations

    • Buyers

  • Changes in the Number of Consumers

    • As birth rate drops, so will the demand for diapers and babyfood.