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Final

Econ Final Exam Notes.docx

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Department
Economics
Course
ECON 1000
Professor
Shadab Qaiser
Semester
Winter

Description
Profit= total revenue which is price x quantity- total cost CHAPTER 1 -factors of production: land, labour, capital, entrepreneurship -positive statements can be tested by checking it against facts -normative statements- how things ought to be (involves judgments), cannot be tested CHAPTER 2 -opportunity cost= what you give up (delta y)/ what you gain (delta x) -factors that influence economic growth: technological change and capital accumulation -complimentary social institutions: firms, markets, property rights, money CHAPTER 3 -relative price- ratio of money price to the money price of the next best alternative good -demand- entire relationship b/w price of the good and quantity demanded -quantity demanded- amount that consumers are willing and able to purchase -law of demand- higher the price of a good, the smaller is the quantity demanded; and the lower the price of a good, the larger is the quantity demanded -results from: substitution effect and income effect -factors that change demand: prices of related goods, expected future prices, income, expected future income and credit, population, preferences -supply- entire relationship b/w the quantity supplied and the price of a good -quantity supplied- amount that producers plan to sell during a given time period at a particular price -law of supply- the higher the price of a good, the greater is the quantity supplied; and the lower the price of a good, the smaller is the quantity supplied -factors that change supply of a good: prices of factors of production, prices of related goods produced, expected future prices, number of suppliers, technology, state of nature CHAPTER 4 -price elasticity of demand -formula: Percentage change in quantity demanded ((new demand- old demand)/ Q avg) x 100% Percentage change in price ((new price- old price)/ P avg) x 100% -absolute value so no negative number Elasticity= 0, perfectly inelastic, ex: insulin, vertical line Elasticity= infinity, perfectly elastic, ex: cars Elasticity= 1, unit elastic Elasticity >, elastic Elasticity <1, inelastic, ex: food, housing -elasticity of demand for a good depends on: closeness of substitutes, proportion of income spent on the good, time elapsed since a price change -cross elasticity of demand- a measure of the responsiveness of demand for a good to a change in the price of a substitute or a complement ((new demand- old demand)/ Q avg) x 100% -formula: Percentage change in quantity demanded Percentage change in price of substitute/ complement ((new price- old price)/ P avg) x 100% -substitute is positive -complement is negative -income elasticity of demand- measures how the quantity demanded of a good responds to a change in income -formula: Percentage change in quantity demanded ((new demand- old demand)/ Q avg) x 100% Percentage change in income ((new income- old income)/ P avg) x 100% E > 1 = elastic, normal good E < 1 = inelastic, normal good E < 0 = inferior good -elasticity of supply- measures the responsiveness of the quantity supplied to a change in the price of a good -formula: Percentage change in quantity supplied ((new demand- old demand)/ Q avg) x 100% Percentage change in price ((new price- old price)/ P avg) x 100% -more time that passes after a price change, the greater is the elasticity of supply CHAPTER 5 -resource allocation methods: market price, command, majority rule, contest, first-come first-served, sharing equally, lottery, personal characteristics, force -individual demand- relationship b/w the price of a good and the quantity demanded -market demand- relationship b/w the price of a good and the quantity demanded -consumer surplus- willingness to pay for a good minus the price paid for it, summed over the quantity bought (area under demand curve and above price paid, usually top triangle on graph) -marginal cost- cost of one more unit of a good or service -individual supply- relationship b/w the price of a good and the quantity supplied by one producer market supply- relationship between the price of a good and the quantity supplied by all producers -producer surplus- price received for a good- min supply price (marginal cost), summed over the quantity sold. (bottom triangle on graph) -obstacles to efficiency: underproduction or overproduction arise when there are: price and quantity regulations, taxes and subsidies, externalities
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