PEC
Chapter 1
scarcity: our inability to satisfy all our wants and needs
opportunity costs = are about sacrifices, the value that you give up getting
something else, are not restricted to monetary costs but can also be expressed in
lost time, pleasure, or any other benefit
marginal benefits will have to exceed the marginal costs to carry out or continue
carrying out the activity: MB > MC
• unlimited wants | limited income
4 factors of production:
1. land (natural resources)
2. labour (human capital)
3. capital (machines, tools, buildings)
4. entrepreneurship (ideas, initiatives, innovations, risk taking)
• positive = facts à objective
• normative = opinions à subjective
Chapter 3
marginal benefit (MB) = measure of the willingness and ability to buy.
demand: the entire relationship between the price of the product and the quantity
demanded à demand curve
quantity demanded (QD): amount of a good or service that consumers are willing to
buy at a particular price à a point at the demand curve
↑P → ↓QD à the higher the price of a good, the smaller the quantity demanded
↓P → ↑QD à the lower the price of a good, the greater the quantity demanded =
Ceteris Paribus
Normal good = demand for a good fall when income falls/ when income rises the
demand for the good rises.
inferior good = demand for a good rise when income falls
Substitute goods = two goods for which an increase in the price of one good leads
to an increase in the demand for the other
Complements goods = two goods for which an increase in the price of one good
leads to a decrease in the demand for the other
, Determinants of demand:
1. change in buyers taste
2. change in number of buyers
3. change in income
4. change in prices of related goods (substitute)
5. change in customers expectations
marginal costs = measure of the willingness and ability to supply
supply: the entire relationship between the quantity supplied and the price à the
supply curve
quantity supplied (QS ): refers to a point on the supply curve – the quantity
supplied at a particular price
↑P → ↑Qs = higher the price of a good, the greater the quantity supplied
↓P → ↓QS = lower the price of a good, the smaller
the quantity supplied
Determinants of Supply:
1. change in resource prices
2. change in technology
3. change in taxes and subsidies
4. change in price of other goods
5. change in producer expectations
6. change in number of suppliers
8 different effects in changes in demand and
supply:
1. Increase in demand
2. Decrease in demand
3. Increase in supply
4. Decrease in supply
5. Increase in demand and supply
6. Decrease in demand and supply
7. Increase in demand; decrease in supply
8. Decrease in demand; increase in supply
Chapter 5
Scare resources might be allocated by
• Market price
• Command
• Majority rule
Chapter 1
scarcity: our inability to satisfy all our wants and needs
opportunity costs = are about sacrifices, the value that you give up getting
something else, are not restricted to monetary costs but can also be expressed in
lost time, pleasure, or any other benefit
marginal benefits will have to exceed the marginal costs to carry out or continue
carrying out the activity: MB > MC
• unlimited wants | limited income
4 factors of production:
1. land (natural resources)
2. labour (human capital)
3. capital (machines, tools, buildings)
4. entrepreneurship (ideas, initiatives, innovations, risk taking)
• positive = facts à objective
• normative = opinions à subjective
Chapter 3
marginal benefit (MB) = measure of the willingness and ability to buy.
demand: the entire relationship between the price of the product and the quantity
demanded à demand curve
quantity demanded (QD): amount of a good or service that consumers are willing to
buy at a particular price à a point at the demand curve
↑P → ↓QD à the higher the price of a good, the smaller the quantity demanded
↓P → ↑QD à the lower the price of a good, the greater the quantity demanded =
Ceteris Paribus
Normal good = demand for a good fall when income falls/ when income rises the
demand for the good rises.
inferior good = demand for a good rise when income falls
Substitute goods = two goods for which an increase in the price of one good leads
to an increase in the demand for the other
Complements goods = two goods for which an increase in the price of one good
leads to a decrease in the demand for the other
, Determinants of demand:
1. change in buyers taste
2. change in number of buyers
3. change in income
4. change in prices of related goods (substitute)
5. change in customers expectations
marginal costs = measure of the willingness and ability to supply
supply: the entire relationship between the quantity supplied and the price à the
supply curve
quantity supplied (QS ): refers to a point on the supply curve – the quantity
supplied at a particular price
↑P → ↑Qs = higher the price of a good, the greater the quantity supplied
↓P → ↓QS = lower the price of a good, the smaller
the quantity supplied
Determinants of Supply:
1. change in resource prices
2. change in technology
3. change in taxes and subsidies
4. change in price of other goods
5. change in producer expectations
6. change in number of suppliers
8 different effects in changes in demand and
supply:
1. Increase in demand
2. Decrease in demand
3. Increase in supply
4. Decrease in supply
5. Increase in demand and supply
6. Decrease in demand and supply
7. Increase in demand; decrease in supply
8. Decrease in demand; increase in supply
Chapter 5
Scare resources might be allocated by
• Market price
• Command
• Majority rule
