MGEA06H3 Study Guide - Final Guide: Marginal Cost, Opportunity Cost, Demand Curve


Department
Economics for Management Studies
Course Code
MGEA06H3
Professor
Ata Mazaheri
Study Guide
Final

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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:

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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
Black market-resale of goods at higher prices due to less quantity and excess demand
Deterioration of properties- torn, broken, etc. No time, so no one is willing to fix it
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