Outlines

MODULE 1: BASIC ECONOMICS

  • Choices = tradeoffs

  • Scarcity: a fundamental issue

    • Addresses allocation of scarce resources

  • Opportunity Cost: every choice incurs a cost

  • Microeconomics: small decisions

    • Marginal Analysis: weigh marginal benefit vs. marginal cost (e.g., pollution, crime, healthcare)

  • Macroeconomics: country's large decisions influenced by factors like inflation and unemployment

  • Incentives align with social/self-interest

  • Positive Economics vs. Normative Economics:

    • Positive focuses on testable statements against facts

    • Normative involves personal judgments and values

  • Economists assume rational behavior for predicting choices.

MODULE 2: PDC MODEL

  • PPC Curve: Represents possible production combinations

  • Assumptions:

    • Fixed quantity of resources

    • Technology remains unchanged

  • Allocative Efficiency: producing goods where costs and benefits are optimized

  • Comparative Advantage: producing with lower opportunity costs

  • Absolute Advantage: ability to produce more using the same resources

  • Economic Growth: reaching unattainable resources through technological innovation

  • Growth Rate Formula: New Real GDP = Old Real GDP x (1 + growth rate)

  • Rule of 70: years to double capital = 70/growth rate

  • Diminishing Returns: adding more of one factor of production yields lower output increases.

MODULE 3: MARKETS (Demand & Supply)

  • Markets facilitate specialization and exchange with defined property rights

  • Price signals indicate scarcity and abundance

  • Demand:

    • Maximum quantity demanded at each price

    • Law of Demand: inverse relationship between price and quantity demanded

    • Factors affecting demand: income, changes in expectations, tastes, market size

  • Supply:

    • Law of Supply: direct relationship between price and quantity supplied

    • Factors affecting supply: cost of inputs, technology, number of firms

  • Equilibrium: occurs when quantity demanded equals quantity supplied

    • Surplus and shortage describe market mismatches.

MODULE 4: ELASTICITY

  • Price Elasticity of Demand: measures sensitivity to price changes

    • Types of elasticity: elastic, unit elastic, inelastic

  • Total Revenue: price x quantity; relationship with price elasticity

  • Cross Price Elasticity: responsiveness of demand for one good to price change in another

  • Income Elasticity: responsiveness of demand to income changes

  • Elasticity of Supply: responsiveness of quantity supplied to price changes

MIDTERM REVIEW

  • Key concepts include marginal cost/benefit, PPC calculations, and growth formulas

  • Understand differences in elasticity calculations for determinants and responses

  • Equilibrium Concepts: equilibrium price and quantity; changes due to supply/demand shifts

    • Elastic demand behavior in response to price changes

    • Marginality and opportunity cost play crucial roles in economic decision-making

  • Determinants of elasticity include availability of substitutes, necessity vs luxury, and time period.