Economics Review.docx

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Department
Economics for Management Studies
Course
MGEA02H3
Professor
H Laurence
Semester
Fall

Description
Economics Review LECTURE ONE Factors of production  Land- natural resources  Labour- workers; unskilled or skilled  Capital- equipment; productive resources that create goods and services Scarcity leads us to make economic choices since there is completing uses What: will be produced? How: will they be produced? For whom: will they be distributed to? (to those who can afford it)  Command economy- central planning  Mixed economy- government plays a role but people determines it through supply and demand Opportunity cost- cost of taking an action is measured by the value of the next best alternative action. If you do something, you have to give up doing something else you might have done Production possibilities frontier  Shows a set of output possibilities possible with a fixed amount of resources  Shows a set of output possibilities such that the production of each good is the maximum possible, given the efficient production of the other good Ex1: Ex2: Ex3: LECTURE 2 Demand curve- behaviour of buyers. Demand has negative slope because as price rises, consumers are not willing to consume as much  Q is the quantity consumers are willing to purchase at D  P is max price consumers will pay for Q of this good Supply curve- behaviour of sellers. Supply has positive slope because of rising marginal cost production. In the long run, supply is less steep (more elastic) Perfectly competitive market 1. Many buyers, sellers (price takers) 2. Product is homogeneous or standardized (little brand loyalty) 3. Perfect information (no one is fooled) 4. Freedom of entry and exit in long run (no barriers to entry or exit) If price ceilings are rigorously enforced (ex: rent controls)  Shortages- excess demand
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