Summary Lectures and definitions Economics (BUAS) year 1 (book: Essential Economics for Business)
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Module
Economics
Institution
NHTV (NHTV)
Book
Essential Economics for Business (formerly Economics and the Business Environment)
Concrete summary of all lectures of microeconomics in year 1, from demand to market structures. This document includes important keywords from the book. Good luck! In addition, you would make me very happy by leaving a review after buying one of my document :)
Introduction
Economics = the study of how society manages its resources
Microeconomics = the economy at the individual level, the actions of firms and households
up to industry level
Economists study the production possibility curve:
• What the curve shows, choices and opportunity cost, increasing opportunity cost),
microeconomics
Demand
Facility Management services: cleaning, catering, maintenance, reception, security etc.
Law of Demand (Ceteris Paribus) = all other things staying the same
The higher the price of goods or services, the less the quantity demanded will be
The lower the price of goods or services, the greater the quantity demanded will be
The demand curve:
• Assumptions (given time period, things remain equal)
• The axes
• Individuals and market demand curves
Other determinants of demand:
• The number and price of substitute goods
• The number and price of complementary goods
• Income (demand rises when income falls and demand falls when income rises)
• Preferences and trends
• Expectations (if the market expects prices to rise, they will buy now and if the market
expects prices to fall, they will buy later)
Movements along and shifts in the demand curve:
• Change in price: movement along the demand curve
Increase in price (rightward shift)
Decrease in price (leftward shift)
• Change in any other determinant of demand: shift in the demand curve
Increase in demand (rightward shift)
Decrease in demand (leftward shift)
Income:
• Normal = an increase in income causes an increase in demand. It has a positive
income elasticity of demand YED. Note a normal good can be income elastic or
income inelastic.
• Inferior = an increase in income causes a fall in demand. It is a good with a negative
income elasticity of demand (YED). An example of an inferior good is AH value bread.
When your income rises you buy less AH value bread and more high quality, organic
bread.
• Luxurious = an increase in income causes a bigger percentage increase in demand. It
means that the income elasticity of demand is greater than one. For example, HD
TV’s would be a luxury good. When income rises, people spend a higher percentage
of their income on the luxury good. (A luxury good is also a normal good, but a normal
good isn’t necessarily a luxury good).
, Supply
The law of supply
• Ceteris Paribus, the higher the price of a good, the greater the quantity will be
supplied and the lower the price of a good, the less the quantity will be supplied
• Examples: pay overtime, hire more admin staff, buy more cars, or hire less productive
staff
price
quantity
Determinants of supply:
• Price of the good
• Price of other goods
• Cost of production
• Changes in technology
• Taxes and subsidies
• External factors
Possible causes for a rise in supply:
• Fall in costs of production
• Reduced profitability of alternative products
• Expectations of a fall in price
Importance of S&D in a market economy:
• Determines the quantity of each good produces and consumed
• Determines the price at which the good is sold (allocation resources)
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