Intro to Microeconomics Study Guide Essay

Economics is the study of all toldocation of scarce resources 1) Chapter One The Principles of Micro economics a. quad resources Land, Labor, Capital (machinery), Entrepreneurship (human capital) b. Principle 1 quite a little face trade- makes, g everyplacenment in addition faces them, the main ace the gov. faces is efficiency vs. equity i. strength is when everyone who makes the most, keeps the most specie ii. Equity would be if everyone was taxed the same c. Principle 2 The follow of something is what you sanctify up iii. fortune make up = the measurement of trade-off you give up something you female genitalia have later, to get something now d. Principle 3 sharp spate think at the margin iv. They do whats outgo for them and maximize benefits v. Think at the margin = thinking about the adjacent one vi. Margin=small incremental changes e. Principle 4 People respond to incentives vii. charges argon major incentives viii. Taxes/tax credit f. Principle 5 shift can make everyone better off ix. Everybody can condition x. More variety of goods xi.Doesnt al personal manners make everyone better off ex Jamaica, NAFTA xii. One partner can be strong and over power others g. Principle 6 Markets are a good way to organize economic activity xiii. People are guided by self-interest xiv. Markets are where consumers and supp catch ones breathrs come together and trade-off occurs h. Principle 7 The organization can improve market outcomes xv. Main act of government enforce property rights xvi. Government can maltreat in if in that locations market failureexternalities occur (taxes can be enforced for cigarettes), people who arent in the market are ffected xvii.Government can metre in when theres market power xviii. Monopoly/oligopoly-government might step in 2) Chapter 2 What does it mean to think like an economist? i. objectively j. Scientific method xix. Observe, hypothesis, identify vari subjects, collect data, test hypothesis, draw a conclusion k. Difficult to conduct a controlled experiment in economics l. Circular Flow Diagram = money and goods and services flow from gossip marketoutput market xx.Flow of Money Market for factors of labor (input market) households get income disbursement on markets of goods and services (output market) which generates revenue for firmswhich pay wages and rent for factors of production xxi. Flow of goods and services Market for factors of production (input market) buys factors (land, labor, capital and entrepreneurship)firms which sell goods and servicesto market of gas and serviceswhich buy goods and services from households, which sell factors to market for factors of production xxii.This marketing is missing government, trade, savings, black market activities and charity work/non-profits m. Production Possibilities termination how much a country can raise xxiii. Assumptions one country, cardinal goods, resource = labor xxiv. Bowed out PPF due to different resources (L) xxv. Opportun ity cost annexs with bowed out PPF because it takes more and more to make one more of the good xxvi. Any points along the PPF are efficient, outside the toot are not feasible and inside the curve is inefficient xxvii. Efficiency means we maximize our resources xxviii.To get more of the good, you have to give up some of the other good xxix. More resources for some(prenominal) goods growing holy curve shifts out xxx. More resources for just one good increase curve shifts on one side only xxxi. If the PPF is straight, its because there are multiple resources for both goods xxxii. Just stating a fact = controlling statement and normative statement = subjective 3) Chapter 3 Absolute and comparative degree Advantage n. Absolute returns is when you make something more efficiently than person else, so that less is required, which means less probability cost xxxiii.Assumptions 2 people who can make goods, 2 goods that both people penury to consumer, time is the only input, both peo ple want to consume both goods and theyll only trade if they can produce one good xxxiv. all(prenominal) person works 8 hrs. per day o. Farmer can produce 8 donuts and 32 cups of coffee tree Baker can produce 24 donuts and 48 cups of coffee xxxv. The bread maker has absolute advantage because he can make more donuts and more coffee than the farmer in 8 hrs. xxxvi. Graphing use points (8, 0) and (0, 32) for farmers PPF and CPF (consumption possibilities frontier).Use points (24, 0) and (0, 48) for bakers PPF and CPF p. Trade deal Farmer will make only coffee (which is all 32 cups of coffee in 8 hrs. ), baker offers farmer 5 donuts for 15 cups of coffee xxxvii. Trade increases variety xxxviii. Farmer ends up with +5 donuts and 15 cups coffee = 5 donuts and 17 cups coffee q. Comparative advantage is when you have a lower opportunity cost xxxix. The opportunity cost of one donut for the farmer is 4 cups of coffee and for the baker is 2 cups of coffeebaker is comparative advantage in donuts because of lower opportunity cost xl.The opportunity cost for one cup of coffee for the farmer is ? donut and for the baker is ? donutfarmer has opportunity cost in coffee because of lower opportunity cost r. The price range after the trade deal will lie between opportunity cost of both people, so both are better off xli. 2 cups of coffee ? P ? 4 cups of coffee 4) Chapter 4 Supply and requisite s. Assumptions one good, one market, market is dead competitive (many buyers and sellers, all goals are the same across firms and price takers) t. Demand xlii. Demand curve shows relationship between price and willingness to buy (P and Qd) xliii. bar demanded (Qd) is the amount consumers are willing and able to buy xliv. LAW OF select P, Qd = negative correlation xlv. Market demand is the sum of individuals demands xlvi. Variables that increase or decrease demand IP-TEN 1. Income a. I, Qd = Normal good b. I, Qd = Inferior good 2. Price of related goods c. Pa, QDb = Substitutes d. Pa , QDb = Complements 3. Taste and preferences 4. ExpectationsEx when you except the price of a good to increase later on, you will buy more now when its cheaper 5. government issue of buyersMore buyers = higher demand u. Supply xlvii. Supply curve shows relationship between Price and Quantity supplied (P and Qs) xlviii. Quantity supplied is the amount sellers are willing and able to sell xlix. LAW OF SUPPLY P, Qd = Positive correlation l. Variables that shift lend curve I-TEN 6. Input price (Ex wages increase) e. IP, Qs f. IP, Qs 7. Technologyadvancement means Cost, Supply 8. Expectationsexcepting a technological advancement 9. Number of sellers g. Sellers, Qs h. Sellers, Qs v. construe market for hybrid cars li. answer price of gasoline goes updemand is impactedP of gas so people will appearance for substitutesdemand for hybrids (curve shifts right) lii. issuing technology advance reduces cost of productionsupply impactedsupply because its easier and cheaper to produce (curve shifts right)P , Qs liii. Event (i) & (ii) P of gas & technology >D and S both impactedD, SQ and P is ambiguous (depends on degrees of shifts and how you graph curve shifts) w. Consider market for bus rides liv.