Shortage and Surplus

Shortage and Surplus

Price floor is a minimum price for a good or service
*Ex: minimum wage

Price sealing is the max for good or service
*Ex rent control

Real Output- increasing employment id declining

Peak: real output at its highest point

Recession-  real output decreasing unemployment rising = Trough

Elasticity of Demand

Elasticity of Demand
 Elastic Demand-
 A product is elastic when demand changes greatly given a small change in prize.

•  Many substitutes
• Luxury good

Ex: cars, coke, steak

>1


Inelastic demand-
A product is said to be inelastic if the demand for it will not change or change very little regarding to prize

• few substitutes
• necessary

Ex:  Heart medicine, gas, Milk
<1

Production possibilities

Production possibilities
*only two goods can be produced

• PPG Graph- shows alternate ways to use resources
• PPC Curve
• PPF Frontier- illustrates opportunity cost 

Point A- attainable to get to the curve, War, Famine, Unemployment

                                                       Point B,D,C attainable & efficient 

                                                       Point X unattainable- things to change it: Technology and Economic growth

Productive efficiency- any point of the curve

Law of Increasing Opportunity Cost - when resources are shifted from making one good or service to another the cost of proceeding the second item increases
 *this occurs because not all resources are equally suited from the production of all goods.
To move up from unattainable:

Economics Intro

Economics

Macro- The study of major components of an economy

• Inflation
• Unemployment
• Supply and Demand 
• GDD 

      Micro- study of household and firms make decisions and how they interest in market 

       Positive statement- fact based

                *Ex minimum wage causes unemployment

     Normative statement- describes the world how it should be

      *descriptive

      * Ex  The retirement age should be raised to 70 to combat the effects of our ageing population.

      Wants- more broad 

      Needs- basic requirements 

      Scarcity- basic fundamental economic problem, unlimited wants with the limited resources

                          Qd > Qs

      Goods-  can be bought, sold and produced

      Consumer goods- intended for final use by the consumer 

      Capital goods - items used for creation of other goods such as factory machinery and trucks

      Services- work performed for someone else

Factors of production

• Land(natural resources)

• Capital 

1. Human- Knowledge and skill 
2. Physical- Human made objects used to create other go

• Labor 

• Entrepreneurship