Essay on Microeconomics chapters 1-4 study guide

Economics
social science that studies how society chooses to allocate scarcity resources.
Microeconomics
social science that studies decission making by individuals, household, business firms, and industry.
Globalization divides in
transportation
communication
information
What is the reason we study economics?
because scarcity exists.
What are the 3 questions every economy have to answer?
WHAT to produce
HOW to produce
For WHOM
what to produce?
Goods and services (Gross Domestic Product “GDP”)
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Gross Domestic Product
Is all the final goods and services produced in a nation in a given period of time.
How to produce?
Using the factors of prduction ( which are the inputs for which we produce outputs (GDP).
Name the Factors of production ?
Land
Labor
Capital
Entrepreneurship
Land
Natural resources used to produce goods and services.
give an example of Land
oil, rivers, farm land, rocks, soil, gas.
Labor
Work time and effort people devote to produce goods and services. ( Work effort and Human capital)
Capital
Physical tools and equipment.
Example of capital
tools, instruments, buildings, machinery, etc…
Entrepreneurship
human resource that organizes the other factors of productions to produce goods and services. Take risks.
Human capital
Skill sets and education.
Example of human capital
doctors, plumbers, auto mechanics, electricians, etc…
(people with a degree, certification and knowledge).
Models
simplification of reality
what are the 3 characteristics models need to have to work?
Explain
Predict
Understand
Opportunity cost
The best foregone alternative we give up when we make a decision.
Law of Increasing Opportunity Cost
As you produce more of a good, the opportunity cost of another good increases.
Production Posibility Curve (PPC)
– All points are posible
-Any point between the curve are possibles
-Points on the PPC are attainable
Attainable
Possible
Efficient
When producing as much as you can.
It increases our quality of life?
Economic growth,
Why economics is the only social science in receive the nobel prize?
because uses the Scientific Method
Scientific Method stages
1. Identify problem
2. Develop Hypothesis
3. Gather data
4. Test hypothesis
Problems with economics as a social science
1. Ceteris paribus
2. association
3. Fallacy of composition
4. nature of subject matter
Volition
Free will
Free will
Volition
What is Quantity demanded (Q)
A point determined by the PRICE of a good.
What is Demand (D)
A line, curve or schedule
Law of Demand
Negative relationship between quantity Demanded and Price.
What changes Quantity demanded?
price
When demand increases it shifts to the _____?
Right→
Widget
Product or service
When demand Decreases it shifts to the _____?
Left←
When supply increases it shifts to the _____?
Right →
What shifts de demand curve?
– Tastes and preferences
– Population and # of buyers
– Income
– Price of related goods
What shifts the Supply curve?
1-Technology
2- Price and availability of inputs
3- # of sellers
4- Expectations
5- Everything else
Normal good in the demand
when income increases, Demand increases.
Inferior good in the demand
When income increases, Demand decreases
Quantity Supply (Qs)
is a point in the supply curve dertermined by the PRICE of the good.
What is Supply
A line curve or schedule
Law of Supply
direct relationship between Quantity supplied and Price
Law of Supply states
Price ↑ then Qs ↑
Price ↓ then Qs ↓
Law of Demand states
Price ↑ then Qd ↓
Price ↓ then Qd ↑
What changes quantity supply
Price
What happen to the supply curve when technology increase in the production of a good?
Supply increase ↑
What happens to the supply curve when the number of sellers increase?
Supply increase ↑
Surplus
Qs is greater than Qd
Shortage
Qd is greater than Qs
What determines supply and demand?
Sellers determine the supply
Buyers determine the demand
Puts down preasure on the price; which means price goes down.
Surplus
What supply and demand determine in a market economy?
Price
A point Where QS and Qd meet?
Equilibrium
globalization
International trade, or production of components and services by the firm in other country.
globalization target
Lower the cost of production and make the product accessible to more people.
Trade off
and exchange–giving up one thing to get somethig else.
6 ideas that define the economic way of thinking?
1. Trade off
2.rational choices
3.benefit
3. Cost
4.how much choice made at the margin
5. choices respond to incentives.
complement good
A good that is consumed WITH another good.
substitute good
A good that can be consumed IN PLACE of another good
Market supply
sum of the supplies of all the sellers in the market.
what is a change in Qs ?
represented by movement along the supply curve.
what is change in supply?
a shift to a new supply curve.
ceteris paribus
other things remaining the same or “other things being equal”
the opportunity cost to a country of having unemployed factor of production is?
Foregone production of goods and services
a positive statement
-makes a statement about how the world operates.
-can be tested against the facts.
economics is the social science that studies
how people make choices to cope wit Scarcity