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Lecture notes summary economics Y2
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Lecture information + notes business economics (Micro and Macro)
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Lecture 1Micro & Macro
Microeconomics Is concerned with the economy at the individual level, the actions of firms and households.
Macroeconomics Analyses the operation of the whole economy. Growth; Unemployment; Inflation; Exchange Rates
Definition
Economics is concerned with the study of how scarce resources are allocated among unlimited wants
We have to make choices of resources scarce
Government has to decide what they are going to supply
Opportunity cost we don’t measure in terms of what it costs, we measure it by what we have to give up (Next best
alternative)
The opportunity cost of being in class is being in bed
Tradeoffs Having air to breath VS. Income of company
Optimizing People are trying to get the optimal level of satisfaction/ happiness
Rational decision makers? Marginal cost/ Marginal benefits
Marginal What the cost/ Benefit of 1 more
Marginal cost < Marginal benefit do more
Marginal cost > Marginal benefit do less
Positive Statement of fact which can be easily proven
Normative Statement of opinion
We are all trying to pass of normative statements as positive
Production possibility curve
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,Lecture 2
As the price for a good rises, the quantity supplied rises and the quantity demanded falls. As the price falls, the quantity
supplied falls and the quantity demanded rises.
Demand
The law of demand:
Ceteris Paribus (all other things staying the same), the higher the price of a good or service, the less will be the quantity
demanded; and the lower the price of a good or service, the greater will be the quantity demanded.
↑P ↓D
↓P ↑D
Price is the only variable that changes ON the demand curve The rest will shift the curve
Market economy market decides what is on the market
Determinant of Demand (BITER):
- Buyers (Number of buyers change)
- Income (Y) Effect
If price goes up buying power goes down
If price goes down buying power goes up
- Taste (Changes in preference)
- Expectations (price to fall/ price to rise)
- Related goods Prices of other goods/ services
No relationship
Substitute goods ( If price of product goes up, demand for substitute goes up)
Complementary goods ( If the price of product goes up, demand for complementary goes down)
Income levels Inferior goods, normal goods, luxury goods
Demand = a-bP (a= cross on the axes, b= point on the graph)
Increase in Demand: Decrease in Demand:
, Supply
The law of supply
The higher the price of a good the greater will be the quantity supplied and the lower the price, the less will be the
quantity supplied
Determinants of Supply (STONER):
- Subsidies (Right shift) and Taxes (left shift)
- Technology changesincreases companies to supply
- Other goods prices (Move to substitute)
- Number of Sellers (How many firms are in the market)
- Expectations (Future prices and economic conditions)
- Resources cost Cost of production (Move to substitute)
Increase in Supply: Decrease in Supply:
Supply= c+dP (c= cross on the axes d= point on
the graph) Price of the good
↑P ↑S
↓P ↓S
Supply and Demand Surplus/ Shortage
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