Microeconomics is the study of specific units of economy
Positive economics deals with the facts and describes the world as is
Normative economics attempts to prescribe how the world should be
Needs are a requirement
Wants are a citizen's desire
Goods are bought commodities
Services is work provided by someone
Scarcity is the problem of facing unlimited wants with limited resources
Shortage means to have more demand than supply
Factors of Production
- Land- natural resources
- Labor- work force
- Capital- tools and skills
- Entrepreneurship- risk taker
Trade offs are the alternative to what one gives up
Opportunity Cost is the best next alternative
Allocative Efficiency are the most desired products being produced by society
Productive Efficiency are the products being produced in the least costly way
Efficiency is using resources to maximum production
Underutilization is using fewer resources than the economy is capable of using
Elasticity of Demand is the measure of how a consumer reacts to change in price
Elastic Demand is not a necessity and there are available substitutes
Inelastic Demand is one that is not sensitive to price change
Total revenue is the total amount received from selling goods and services
Fixed cost is the cost that does not change no matter how much is produced
Variable Cost is the cost that rises or falls depending on how much is produced
Marginal cost is the cost of producing one more unit of a good
Demand is the quantities that people are able to buy at various prices
CAUSES in "Change in Demand"
- Change in buyer's taste
- Change in the # of buyers
- Change in the price of related goods
- Change in income
- Change in expected goods
Supply is the quantity that producers and sellers are willing and able to produce
CAUSES in "Change in Supply"
- Change in weather
- Change in the # of sellers
- Change in the cost of production
- Change in technology
- Change in expectations
- Change in taxes or subsidies
Inside the curve- attainable but ineffective
On the curve- attainable and efficient
Outside the curve- not attainable
