Unit 1 *Microeconomics*

We use it, carry it out, and it impacts us
It makes us become more critical thinkers

How scarce (limited) resources are going to be used to satisfy our unlimited wants and needs
It's about trying to make life easier or more satisfactory based on using the limited resources

Try to address scarcity

Not enough goods and services to satisfy all of our wants and needs

If we all worked together, we could overcome poverty - we could never overcome scarcity

The importance that we give to an action or alternative
Prioritizing
They're subjective and can change over time

Scarcity leads to value judgments that leads to opportunity costs

The best choice that was given up when you made a decision OR it's the highest valued alternative that you didn't choose
ex) By choosing to go to class, my opportunity cost was sleep

It forces us to use efficiency and it forces us to have competition

Producing the largest amount of goods or services possible WITHOUT altering quality (and without changing the amount of resources being used)
Cost is the outcome

Physical substance; tangible; if it's been created

Purchased for us to consume

Purchased to use to produce or provide other goods and services thus becoming a resource

Intangible substance or a task

Anything that is used to produce a good or provide a service; interchangeable with "factors of production"

Natural resources
Resources we didn't create, God did

Human made aides to production

Mental and physical work - also known as human resource

Managerial side of people that combines all the resources to accomplish goods and services

Resources

All resources are privately owned

Payment for resources

Payment for labor

Payment for land

Payment for capital goods

It's about trying to make life easier or more satisfactory based on using the limited resources

1) Trade offs must happen
2) Individuals try to get the most from their limited resources
3) Incentives matter
4) Individuals make decisions at the margin
5) Info can make better choices, but the time to acquire the info is costly
6) Secondary effects; indirect/direct effects
7) The value of a good or service is subjective
8) The test of a theory is its ability to predict

When choosing between two items; trying to decide if the extra price is worth the extra benefit

Unintended consequences; can be positive or negative; sometimes it weighs heavier than the primary objective

Micro: focused on individual decision making as well as individual markets within the economy
Macro: is a focus of the aggregate (everything overall/total) effects on the economy

Needs cooperation; pencil example; rush hour traffic example

Believed that individuals pursuing their own interests would be directed by the "invisible hand" of market prices toward the production of those goods that were most advantageous to society
- Competitive markets would lead to coordination, order, and efficiency without the direction of a central authority

1) When voluntary trade occurs, both parties are better off because of the trade
2) Trade creates value and actually increases wealth

A buyer, seller, and an agreed upon price

The best choice that was given up when you made a decision; OR it's the highest valued alternative that you didn't end up choosing
ex) By going to class, sleep is my opportunity cost

The cost incurred in locating, negotiating, and obtaining a product
ex) Time is costly; if you're spending time doing something, you're paying cost

Will usually decrease overall cost

1) What're we gonna produce?
2) How are we gonna produce it?
3) Who will get it?

What - What ppl are buying more of, that's what more will be made of
How - The market interacting makes the decision
Who - The price decides who gets what

Government has taken control of everything
What - Gov. committee sits down to answer
How - Gov determines
Who - Gov. determines

Noted the importance that businesses can achieve higher output levels and greater productivity from their workers through specialization and division of labor

Property rights that are exclusively held by an owner and protected against invasion by others; private property can be transferred, sold, or mortgaged at the owner's discretion

1) Owners have an incentive to be good stewards with their property
2) Private property rights encourage investment
3) Clearly defined property rights will alleviate destructive fighting over who owns the resources

Will show the maximum amount of two goods or services that can be produced with a given amount of resources, ceteris paribus

1) Investment
2) Technological advances
3) Improved institutions
4) Greater work effort (forgoing leisure)

Any point that is inside the production possibilities curve (not on it, on the inside)

An outward shift in the production possibilities curve through time; reaching the point on the outside of the original production possibilities curve with the new curve

An abstract concept encompassing the forces of supply and demand and the interaction of buyers and sellers with the potential for exchange to occur

Different amounts of a product that consumers are willing and able to purchase at various prices over a given period of time ceteris paribus

Quantity demanded of a particular product is negatively or inversely comparative to price ceteris paribus

1) Based upon scarcity - in regards to income
2) Substitution - goods that will perform in a different function

A specific/particular amount that people desire at a specific price

Price is the only thing that can change quantity demanded; the point on the demand curve either moves up or down depending on increase or decrease

I.R.E.N.T.
Income of the buyer
Related goods
Expectations of
Consumers
Number of buyers
Tastes & preferences

If quantity demanded increases, the curve moves to the right; if quantity demanded decreases, the curve moves to the left

Various amounts of a product that producers are willing and able to provide at various prices over a given period of time, ceteris paribus

Producers will supply more product at a higher price than at a lower price

The point on the supply curve

The only thing that can change the quantity supplied is the price to produce supply - therefore the point on the supply curve moves up/down depending on increase/decrease

C.R.E.N.T.
Cost
Related goods
Expectations
Number of producers
Technology

If supply increases, the curve moves to the right; if it decreases, it moves to the left

1) Is price changed right now?
2) What factor or determinant is being effected?
3) Which curve is being effected?
4) How does it effect the curve?

The market is satisfied when quantity demanded is equal to quantity supplied

When quantity demanded is more than quantity supplied

When quantity demanded is less than quantity supplied

As the supply or demand curve changes, the equilibrium changes accordingly; always the point where the two curves meet

When we're willing and able to pay a higher price than what we had to pay

When they're willing and able to accept a lower price when they didn't have to

...

When the price (or another factor) of one thing directly effects another; sometimes the effects go the same direction

Negative relationship - the effects go in opposite directions of each other

A government established maximum price at which a good can be sold

A government established minimum price at which a good can be sold

1) Sometimes suppliers choose to not take advantage of short term imbalances in the market
2) Sometimes the government interferes

Choosing one or the other; if one is outrageous in price, get the other

Taking this and this; if one increases in price it'll effect both goods; example: peanut butter and jelly