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Important Formulas for Supply

• Fixed Cost: Cost that does not change no matter how much of a good is produced
• Variable cost: Cost that rises or falls depending upon how much is produced. ex: electricity bill.

• TFC + TVC = TC

• AFC + AVC = ATC

• TFC/ Q = AFC

• TVC/ Q = AVC

• TC/ Q = ATC

• AFC x Q = TFC

• AVC x Q = TVC
• marginal cost = new TC - old TC

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

3 types of movements can occur within the PPC
1. Inside the curve

2. Along the PPC

3. Shifts of the PPC


*PPC- Production Possibility Curve

January 20 2017
Excess Demand

Excess demand: quantity demanded is greater than quantity supplied (shortage). Ex: flu shots at Walgreen's

Shortage: consumers can't get quantity of items they desire

Equilibrium: Point at which supply/demand curve intercept

Price ceiling: occurs when government puts a legal limit on how high the price of a product can be. (must be set below the equilibrium mark to be efficient)

Excess supply: quantity supplied is greater than quantity demanded (surplus)

Surplus: when the producers have inventory they can't get rid of.

Price Floor: Lowest legal price a commodity can be sold at. (Used by government to prevent prices from becoming too low) ex: minimum wage.

January 11, 2017

Elasticity of Demand

Elasticity of demand: Measure of how consumers react to a change in price.

Elastic demand

• Demand that is very sensitive to a change in price
• Product is not a necessity
• Always greater than 1
• Available substitutes
• Example: soda, coats, steak

Inelastic demand

• Demand that is not very sensitive to a change in price
• Product is a necessity
• Few/ no substitutes
• Less than one
• Example: gas, insulin

Unitary elastic

• Equal to one (in a perfect society)

Total Revenue: total amount of money a company receives from selling goods and services.

   Formula: Price x Quantity

January 3, 2017

Macroeconomics- The study of economy as a whole

Positive economics: claims attempt to describe the world as is. Very descriptive in nature. Fact-based

Normative economics: claims attempt to describe how the world should be. Opinion based.

Needs vs. Wants

Needs: basic requirements for survival

Wants: desires

Scarcity vs. Shortage

Scarcity: fundamental economic problem that all societies face. How to satisfy unlimited wants with limited resources.

Shortage: quantity demand it exceeds quantity supplied.

Goods vs. Services

Goods: tangible (touchable) commodities. Capital/consumer goods. Capital goods are items used in creation of other goods. Consumer goods are goods intended for use by consumer.

Services: work that is performed for someone. ex: entertainment, getting haircut, etc.

Two Types of Efficiency

• Productive- Products are being produced in the least costly way. Any point on the PPC

• Allocative- Products being produced are the ones most desired by society

January 4, 2017

Factors Of Production

1. Land: natural resources
2. Labor
3. Capital (human/ physical) human: when ppl acquire skills and knowledge through experience/education. Physical: money, tools, buildings, machinery etc
4. Entrepreneurship: involves risk taking, being inventive/innovative. Takes 3 factors of production to promote the business.

Trade-offs: alternative we sacrifice when we make a decision

Opportunity cost: next best alternative

Guns or butter:  trade-offs a country faces when choosing whether to produce more or less of military goods or consumer goods

Thinking at the margins: deciding whether to add/subtract one additional unit of some resource

Efficiency: using resources in such a way to maximize production of goods/services. Increases profits

Under-utilization: opposite of efficiency. Using fewer resources, leads to decreased profits.