Opportunity Cost: What is given up
in order to get something else
PPF: Production Possibility Frontier
Economic Growth
Economic Models
Competitive Market: there are so many
people in the market that no single person
affects the price of a good
Inefficient Market: A market that does
not use all resources available so
resources are wastes
Market Failure: When the individual
pursuit of self-interest lead to bad
results for society as a whole
Efficient Market: A
market that uses up all
resources and where
people can be better or
worse off
Supply and Demand
Supply curve
Movement along the
supply curve
Price
Shifts in the Supply Curve
1. Change in input prices
2. Change in price of
related goods/services
3. Changes in technology
4. Changes in expectations
5. Changes in number of
producers
Supply Schedule
Demand Curve
Shifts in the demand curve
1. Change price of related goods
2. Change in income
3. Changes in taste
4. Changes in expectations
5. Changes in number consumers
Movement along the demand curve
Price
Demand Schedule
Gains from Trade
Comparative Advantage: occurs when one
country has a lower opportunity cost for a
good than another country for the same
product
Absolute Advantage: occurs when country that
has the ability to make more of a good because
it has more resources
Resources are scarce leading
people to make desicions
Incentives
People usually exploit opportunities
to make themselves better off
Marginal Thinking
Do I drink coffee or have a cup of juice??
Trade creates value
Markets Move Toward Equilibrium
Surplus: there is
more of a product
produced that
consumers demand
Shortage: there is
more demand for a
product than is
produced by sellers
Total Surplus
Consumer Surplus
Willingness to pay
The difference between the
sell price and the amount a
consumer is willing to pay
Producer surplus:
Willingness to sell
the different between the
sell price and the amount
the producer is willing to
sell
The area on a supply and demand
curve where they intersect or the space
on the schedule where the price is the
same for quantity demanded or supplied
and the demand and supply