Sunday, January 24, 2016

(1-21-16) Business Cycles

Business Cycles

Peak-Highest point of real GDP -has the lowest unemployment and the greatest spending

Expansion-(recover phase) real GDP is increasing -causes spending to increase and unemployment to decrease

Contraction-(Recession) real GDP declines for six months -increase in unemployment reduction in spending

Trough- Lowest point of real GDP -highest unemployment and least amount of spending


-1 cycle occurs from trough to trough

-Cycles average from 5 to 7 years

-Recessions last approximently 14 months

-Peaks and Trough's are meaningless as we never know that we are in one until it is over.

(1-15-16) Supply and Demand

Demand and Supply


(credit for image: http://www.investopedia.com/university/economics/economics3.asp)
Demand-Quantities that people are willing and able to buy at various prices

Supply-Quantity that producers or sellers are willing and able to produce at various prices

The law of Demand- Inverse relationship between price and quantity demanded.  ↑P↓ Q

The law of Supply- There is a direct relationship between price and quantity supplied ↑P↑Q ↓ P↓ Q

What causes a "change in quantity demanded"?(ΔQD)/What causes a "change in quantity supplied"?(ΔQS) - Δ in price

What causes a "change in demand"?(ΔD)
1.Δ in buyers taste (advertisement)

2.Δ in the # of buyers (population)

3.Δ in the price of related goods -Complementary goods (ham and eggs) -Substitute goods (7Up and Mountain dew)

4.Δ in income - Normal goods -Inferior goods

5.Δ in expectations (future based)

What causes a "change in supply"? (ΔS)
1.Δ in weather (natural)

2.Δ in # of sellers

3.Δ in the costs of production

4.Δ in technology

5.Δ in expectations (sellers)

6.Δ in taxes or subsidies

Normal Goods-as peoples incomes rise demands for good and services also rises
Inferior Goods- an increase in income causes a fall in demand

(1-13-16) Price of Elasticity

Price of Elasticity (PED)

Elasticity of demand-Measure of how consumers react to a change in price -(taking a stab at things)

Elastic demand-demand that is very sensitive to a change in price E>1 the product is not a necessity, and their are available substitutes (cookies)

InElastic demand-Is not very sensitive to a change in price E<1 the product is a necessity, their are few to no substitutes, people will buy no matter what (water)

Unit/Unitary elastic-E=1

-Ex:Elastic demand - Soda,steaks,candy,Fur coats
-Ex;Inelastic demand - Gas,Salt,Insulin/Medication,Milk

Price of Elasticity of Demand (PED)

Step 1: Quantity
New Quantity-Old Quantity/old quantity

Step 2: Price
New Price- Old Price/ old price

Step 3: PED
%▲  in quantity demanded/%▲ in price = |PED|

Total Revenue-Total amount of  money a firm receives from selling goods and services TR=P(price)xQ(Quantity)

Fixed Cost-a cost that does not change no matter, how much is produced 
Ex:Rent, Mortgage,Insurance,Salaries

Variable Cost-a cost that rises or falls depending upon how much is produced
Ex: Electricity

Marginal Cost- the cost of producing one more unit of a good

Formula's

TFC + TVC = TC
AFC + AVC = ATC
TFC/Q = AFC
TVC/Q = AVC
TC/Q = ATC
TFC = AFC x Q
TVC = AVC x Q
MC = new TC - old TC

Key:
Q- Quantity
TFC-Total Fixed Cost
TVC- Total Variable Cost
TC- Total Cost
MC- Marginal Cost
AFC- Average Fixed Cost
AVC- Average Variable Cost
ATC- Average Total Cost

(1/6/16) Production

Production Possibilities

Trade Offs-Alternative that we give up when we choose one course of action over another

Opportunity Cost-Form of trade off-next best alternative

Production Possibilities Curve(PPC)/Frontier(PPF)/Graph(PPG)-Shows an alternative ways to use a(n) economies resources


4 Assumptions of a PPG

1.Two goods- no more than 2 products
2. Fixed Resources-items does not change
3.Fixed technology-Info doesn't change
4.Full employment of resources


Efficiency-Using resources in such a way as to maximise the production of goods and services

Allocative Efficiency-The products that are being produced are the ones most desired by society

Productive Efficiency-Products are being produced in the least costly way (any point on the PPC)

Underutilization-Using fewer resources than an economy is capable of using
 A-Inside the curve B,C,D-On the Curve X-Outside the Curve
Inside the Curve-1.underutilization 2.attainable,but inefficient
On the Curve-Attainable and Efficient
Outside the Curve-Unattainable
(credit for image-http://resourcesforhistoryteachers.wikispaces.com/E.1.9)
3 Types of Movement that occur within the PPC-
1.Inside the PPC- Resources are unemployed or underemployed (Productive efficiency) Attainable but inefficient
2.Along the PPC-Attainable and efficient
3.Shifts of the PPC-when resources and technology change
What causes the PPC/PPF to Shift?
1.Technological change
2. resources
3. in the labor force
4.Economic growth
5.Natural disasters/war/famine
6;More education on training (human capital)

(1/4/16 ) Economics Introduction - Unit 1


Unit 1 - Economics Introduction

Macroeconomics vs Microeconomics

Macro-The study of the economy as a whole (Big Picture)
-Ex:Supply+Demand, International Trade
Micro-Study of individual or specific units
-Ex:Market Structure, Business organization

Positive Economics vs Normative Economics

Positive-Attempts to describe the world as it is very descriptive 
-Ex: collects and presents facts "What is"
Normative-Attempts to prescribe how the world should be very prescriptive
-Ex:"Ought to be" "Should be" - Opinion

Needs vs Wants

Needs-basic requirements for survival
-Ex: (H2O, Food, Shelter, Clothing) 
Wants- Desires of Citizens
-Ex:what you wish for

Goods vs Services

Goods-Tangible commodities (Bought,Sold,or Produced)
-Ex: Capital goods-items used in the creation of other goods (Trucks,Factory Machines)
 consumer goods-Goods that are intended for final use by the consumer
Services-Work that is performed for someone
-Ex:(Haircut,School, Concert)

Scarcity vs Shortage

Scarcity-the most fundamental economic problems facing all societies
-Ex:How to satisfy unlimited wants with limited resources, involves a choice (oil) 
Shortage-Quantity Demanded> Quantity Supply

Factors of Production

Factors of Production-Resources required to produce goods and services 
1.Land-Natural resources
2.Labor-Workforce
3.Capital -Human:(Skills)[where/how]-(College/training) Physical:(Tools,Machinery,Buildings,Trucks)
4.Entrepreneurship-Innovative and risktaker