Midterm 1 ECN 001AY

people make decisions with some desired outcome in mind

goods outside the PPF line

Not the same as selfishness, improving your own personal goods

machines, equipment, infrastructure ---> set up for future economic growth

food, clothes, etc ---> help economic growth now

Comparisons of marginal benefits and marginal costs, usually for decision making (in a state of scarcity always comes with marginal benefit that comes with a marginal cost

Studies the economy as a whole or its basic and smaller subdivisions

A collections of specific economic units treated as if they were one unit

focuses on cause and effect relationships and avoids value judgements and tries to establish scientific statement about economic behavior

incorporates value judgments about what the economy should be like or what policy actions shoudl be recommended

the need to make choices because economic wants exceed economic means - will enhance your understanding of economic models and the difference between microeconomics and macro

scientific based, make and test hypotheses, gather data

capitalism, --> ownership of resources and use of markets to coordinate and direct ecnoomic activity

government owns most property resources and economic decision making is set by a central ecoonomic plan created and enforced by the govt.

deteremines what goods are produced, how they are producced, who gets them , how to accommodate change , and how to promote technological progress.

ensures that entrpreneurs and private businesses are free to btain and use economi resources to rpoduce their choirse of goods and services and to sell them in their chosen markets

free dom choice exercised in the pursuit of money

ensures that entrpreneurs and private bsuinesses are free to obtain and use economic resources to produce their choice of goods and services and to sell them in their chose markets

economic unit tries to achieve its own particular goal

shows the inverse relationship between price and quantity demanded for a product

happens when the value of a proudct decreases as more people use it.

shift of the demand curve; shift of the suplly curve

the production of a good in the least costly way; occurs when production takes place at the output level which per-unit production costs are minimized

price where the intentions of buyers and sellers match

happens when the value or demand of a product increases as more people use it.

refers to the ability of the forces of supply and demand ot establish a price at which selling and buying decisions are consistent.

Ease of switiching from one good to another

when the price for a product is reduced the total revenue will fall

$((Q_2 - Q_1) / ((Q_1 + Q_2) / (2))) / ((P_2 - P_1) / ((P_1 + P_2) / (2)))$

because the original reference qulaity is small

- percentage change in quantity demanded of product X / percentage change in price of product Y
- if negative then complementary
- if positive then substitude
- if 0 or near 0 then independent goods

if demand is inelastic a price decrease reduces total revenue.

is the length of time ove rwhich producers are unabel to respond to a chang ein price with a chang ein the quantity supplied.

period of time too short to chang eplant capacity

normal good