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Lecture 3

ECON Lecture 3.docx

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Department
Economics
Course
ECON 1000
Professor
Sadia Mariam Malik
Semester
Fall

Description
Opportunity cost In one hour Sue can produce 40 caps or 4 jackets and Tessa can produce 80 caps or 4 jacketsSueTessaCaps110120Jackets1020What you give up What you gain440110Sue has a lower opportunity cost for jackets so she should specialize in capsA market is any arrangement that enables buyers and sellers to get information and do business with each otherThe money price of a good is the amount of money needed to buy itThe relative price of a goodthe ratio of its money price to the money price of the next best alternative goodis its opportunity cost Relative price of good A in terms of good b is PofAPofBoMuffin PofM2oEnergy Bar PofE 1oRelative price of muffin in terms of energy bar is PofMPofE2 oThis means you can have 2 energy bars for one muffin the opportunity cost is 2 energy barsDemandoWant itoCan afford itoHave a definite plan to buy itoWants are unlimited desires or wished people have for goods and servicesoDemand reflects a decision about which wants to satisfyoThe quantity demanded of a goods or service is the amount consumers are willing to purchase during a certain time at a certain priceQuantity Demanded is different from demandoQuantity demanded is linked to priceoDemand is linked to factors other than priceThe law of demand states all other things remaining the same the higher
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