Econ notes PDF

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Determinants of demand - Price of the good or service - Absolute price: on the price tag, regardless of currency - Relative price: price of a good in terms of other prices (a cup of coffee is 4 bagels) - The opportunity cost of a good, what you must give up in order to purchase what you are buying - Tastes and preferences - Income and wealth - Inferior goods fluctuate price based on collective income… when income increases, demand increases - Normal goods - Quasi-linear goods - Prices of related/substitute goods - Expectations of future prices Law of Demand: when the price of a good or services increases, the quantity demanded decreases and when the price decreases the quantity demanded increases Marginal benefit: the extra benefit one receives, measured in dollars, of consuming an additional unit of a good or service→ buying in bulk Supply: the quantities of a good or service producers are willing and able to supply at various prices over a given period of time holding everything else constant Determinants of Supply: - Price of good or service - Cost of production - Prices of related goods - Complemented - Substitutes: can produce a or b (same resources used for both) - Expected future prices - technology/equipment Law of Supply: when the price of a good or service increases the quantity supplied increases and when the price decreases the quantity supplied decreases Consumer Surplus: the difference between what a customer is willing to pay and must pay for each unit

Producer Surplus: the difference between what a producer is willing to sell and what they must sell a unit

Total economic surplus: loss in economic surplus indicates unhealthy economy

Price elasticity of demand: %change of Q demanded/ %change in price

related to slope but uses it differently Perfect elasticity- horizontal demand curve, price never changes p much regardless of price b/c things are perfect substitutes (oil, strawberries in a farmers market, etc.) Perfect inelasticity- vertical demand curve, price changes completely reflective of price b/c there are no substitutes for a certain good (water, lifesaving medicine, gas prices)

Price elasticity of demand: - How many available substitutes there are - How necessary or not a good is - How much a person’s budget must be taken into account - How much time is in consideration You can only calculate price elasticity of demand between two points on the same demand curve (bc if there r 2 curves something has changed other than price - Normal good: demand goes up when income is higher - Inferior goods: all necessary goods, demand decreases when income is higher - Luxury goods: all normal goods, % demand increases proportionally with income increase - Spend more money on clothes when u have more money→ special category - Necessary goods: % demand decreases proportionally with income decrease

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No disposables when ur poor

Slope of supply curve determines elasticity→ availability of factors of production impact price elasticity of supply

Price ceiling: government imposed ceiling on price $ below equilibrium price, tend to cause shortages

Price floor: government or market imposed floor on price $ above equilibrium, tend to cause surpluses

Deadweight loss...