Aiden Johnson Economics Study Guide

Economics First Semester

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Economics-­‐ the study of the pursuit of scarce resources to satisfy unlimited wants. o Wants >Availability of resources o Economics is about Scarcity o Scarcity-­‐ Limited amount (not necessarily a shortage) 4 Main Types of Resources o Land-­‐ Not just land, all gifts of nature. § Paid for by Rent. o Labor-­‐ Mental or Physical effort. § Paid for with Wages o Capital-­‐ Equipment, Tools, Education, Experience, etc., needed to provide a good or service. § Physical or Intellectual capital. § Paid for with Interest o Entrepreneurial Ability § Paid for by Profit Opportunity Cost-­‐ Something that we forgo in order to have something else.

o Low O.C. is better. Production Possibility Schedule-­‐ I can only add on so much of a product without stalling another. Production Possibilities Curve-­‐ Concave or Constant shows the entire demand curve.

Shows full employment at full efficiency. The Entire Curve is the Demand Curve • If car production goes from 20 to 16 in order to make 1 plane the Opportunity Cost is 4.

Aiden Johnson Economics Study Guide •

Supply and Demand o Demand-­‐ The various quantities of goods and services that consumers are willing and able to purchase at various prices.

$1 500

Price Quantity

$2 450

$3 400

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Demand is the entire schedule

$4 300

$5 150

$6 40

$7 5

Quantity Demand-­‐ The amount of a good that people want to buy (demand) at a given price

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A change in price does not affect demand, only quantity demand.

Price and Quantity have an inverse relationship with demand.

Price Equilibrium-­‐ The price at which the supply equals the quantity demanded

Critical Point-­‐ The Point at which the Price Equilibrium meets the Quantity Equilibrium

Quantity Equilibrium-­‐ The quantity demanded or supplied at the Equilibrium Price

Represents Demand

Aiden Johnson Economics Study Guide

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Determinants of Demand o