...Scarcity: A situation in which unlimited wants exceed the limited resources available to fulfill those wants. Economics: the study of the choices people make to attain their goals, given their scarce resources. Economic model: A simplified version of reality used to analyze real-world economic situations. Market: a group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade. Markets three important ideas:1.people are rational 2.People respond to economic incentives. 3.Optimal decisions are made at the margin. Marginal analysis:Analysis that involves comparing marginal benefits and marginal costs.. Trade-off: the idea that because of scarcity, producing more of one good or service means producing less of another good or service. Opportunity cost: the highest-valued that must be given up to engage in an activity. Three fundamental questions:1. What goods and services will be produced? Consumers, firms, and the government face the problem of scarcity by trading off on good or service for another. 2. How will the goods and services be produced? Firms may need to choose between a production method in the united state that uses fewer workers and more machines and a production method in china that uses more workers and fewer machines. 3. Who will receive the goods and services produced? People are willing to give up some of their income-and, therefore, some of their ability to purchase goods and services- by donating...
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...Microeconomics Chapter 1 What is economics? Economic questions exist because everyone wants more than it can possibly get. We can't satisfy all our wants, this is called scarcity. General shortage of everything is scarcity. Because of scarcity we must make choices. These choices depend on the incentives we are faced with. Incentives are rewards that we would reap or a penalty we would face if we made a certain choice. Definition of economics- the social science that studies the choices that individuals, businesses, governments, and societies make as they cope with scarcity and incentives that influence and reconcile those choices. There are 2 branches of economics Microeconomics- the study of choices made by the individuals and businesses and the influence of government in those choices Macroeconomics- the study of the effects on the national and global economy of the choices that individuals, businesses and governments make There are 2 questions that essentially summarize the scope of economics 1. How do choices end up determining what, how, and for whom goods and services are produced? 2. How can choices made in the pursuit of self-interest also promote the social interest Question 1 Goods- the physical items which are produced for people Services- the actions performed which are rendered for the people Goods and services are the objects that people value and produce to satisfy needs. What?- What should we produce? What people produce changes over...
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...Definition: situation in which unlimited wants exceed the limited resources available to fulfill those wants UNLIMTED WANTS. LIMITED RESOURCES • Marking choices, we assume that: o People are rational o They respond to economic incentives o Optimal decisions are made at the margin • ECONOMISTS REASON THAT OPTIMAL DECISION IS WHEN MC=MB • Marginal o Definition=next unit o Marginal cost=cost for next unit o Marginal benefit=benefit for next unit • Opportunity cost o Definition= highest valued alternative that must be given up to engage in an activity WHAT MUST BE GIVEN UP o Lwer opportunity cost= comparative advantage= aka they give up less so should do the duty o Ex: father has kids sweep the shop for him. He can do it if he wanted to, but gives up more because there are other things he could be doing. Since kids have nothing else to do, they give up lessss bc their time is less valued o How it comes up and how it’s used • Capital • Factors of production o Land o Labor o Capital o Entrepreneurship Risk taker • Positive vs. normative o Positive= what is o Normative= what ought to be • PPF(Productions possibility frontier) o Why is it curved, and not linear? o CURVED BC LAW OF INCREASING MARGINAL OPPORTUNITY COSTS BC INCREASING AUTOMOBILE PRODUCTION BY A GIVEN QUANTITY REQUIRES LARGER AND LARGER DECREASES IN TANK PRODCUTIN. • Comparative advantage o Refer to handout o Practice ivy’s method! • Circular flow o Memorize! o Not orange...
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...people: local residents (both students and other local residents) and visitors to your town. Devise a price discrimination strategy that will increase your revenues compared to a single-pricing strategy. At my sub shop I would cater more to the local customers by providing lower priced menu items and specials. I would establish lower rates for local college students with i.d. to encourage them to return regularly. The price for a sub sandwich from my sub shop would be $3.50 for students of local colleges and universities and $4.50 for visitors and other local customers. Tourists and visitors often expect to dine out when visiting other cities. This type of revenue provides a boost in profits, but does not contribute to the steady stream of profits provided by regular local customers. Meal specials will include a sub, a fountain drink and a muffin at a cost of $5.00 for local university and college students. Sub specials for visitors and non college residents will include the same meal for $6.50. Charging an extra $1.50 for the price of the drink and cookie pays for the cookie that is provided free to the locals. This price increase not only pays for the free cookies given to the locals but the extra $1 on the sub meal provides more revenue to the business. There would also be a special price for local law enforcement officers and local fire fighters also. This price discrimination strategy will boost the revenue of the business and encourage more customers to return...
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...Chapter 1 – Reasoning with Economics: Models and Information • Economists base much of our thinking on simplified models of reality that neglect many details o Models that apply to a broad range of situations must be simple, but they can help you think logically no matter what happens in your market. • Why be abstract when you have facts? o Reality is so complex and our mental capacities so limited that we must be selective in what we think about. • Economists are human and they have values and beliefs that might render their objectivity suspect o Positive economics describes and analyzes things as they are (or as objectively as they can be seen) o Normative economics is about how things “ought to be” – it explicitly acknowledges the researcher’s values. Whatever positive theory may say, an economist’s normative views on prostitution or the drug trade might lead her to recommend that these activities remain illegal. • Rationality o Economics studies the choices people make in the face of constraints that limit their options o Economics studies the allocation of scarce resources among competing goals. Underlying both definitions is an assumption that people act rationally, with an eye towards attaining objectives they have chosen. o Rationality does not mean that people are computers People may not perfectly understand their own preferences or do not know how best to overcome the obstacles that stand between them and their goals. o What rationality offers...
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...effected in certain senarios. Also in this summary we will go over the affects on equlibrium price, quantiy, and decision making. Finally we will talk about the firms stategies how it relates to the senario. The senario in this simulation brings you to a new city called Atlantis where you are a property manager of some two bed room apartments. Your job is to manage the rental rates and make sure things don’t get out of hand in reguads to shifts in the demand and supply. The first topic we shall review in this paper is the miro and macro economic principles that came up in the simulation. From the the microeconomy stand point the two concepts that came up were the supply and demand as well as price cellings. The supply and demand was the most obvious one to choose. In the simulation you had to figure out how much the supply and demand curve shifted. In most cases the demand curve was always shifting due to the preferences of the simulation always changing. If the population increased then the demand for the apartments increased. Same thing if the preference changed it could cause and increased affect or a decreased affect on the curve. However the case may be the factors caused the curve to shift to the right for an increase and shift to the left for a decrease. As for the price ceiling this topic came up once in the simulation however it is a microeconomic topic. The price ceiling has a big effect on the quantity demanded and quantity supplied. In these cases you must make...
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...of businesses moving into the area bringing an increase in job market, the change in company expectations and consumer preferences, and the policy changes implemented by the government (University of Phoenix website, 2013). Identifying the two microeconomic and two macroeconomic principles present in the simulation and to explain why these principles are categorized as microeconomic or macroeconomic. The supply and demand was affected by decreasing the rent to lower the vacancy percentage and maximize revenue for the company. This moved is considered a temporary fix on a month-to-month basis and a good example of microeconomics. Another example of microeconomics is when the new company came into town and caused an increased in the population along an increased in the job market. The population and job increase suggest they increase rental rates in response to the increase in demand. An example of macroeconomics is the survey showing that individuals working in Atlantis are living in neighboring cities because of the cost of rent is less. Another example of macroeconomics is when the government steps in and puts a ceiling of $1550 on monthly rent for two-bedroom apartments so that middle-class families can afford to live in the city in which they work. This caused the company to rent only a portion of their apartments to make a profit because of the maintenance cost (University of Phoenix website, 2013). To determine one...
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...Economics 247 Assignment 1 Version A This assignment has a maximum total of 100 marks and is worth 10% of your total grade for this course. You should complete it after completing your course work for Units 1 through 5. Answer each question clearly and concisely. 1. a. Define opportunity cost, and explain its importance in economics. (3 marks) The opportunity cost of something is what you must give up of one thing, in order to get another. Opportunity cost is a key concept of economics, and is described as expressing the basic relationship between scarcity and choice. The notion of opportunity cost plays a crucial part in ensuring that scarce resources are used efficiently. b. The province of British Columbia hosted the 2010 Olympic Games and invested millions of dollars in improvements to facilities for these events. How would one determine the opportunity cost of the 2010 Olympic Games? In order to determine the opportunity cost of the 2010 Olympic Games, the province must consider what they could have done with the money (4 marks) if they had invested it elsewhere Also to be considered is the Event Benefits less the Event Costs. 2. Use the graph below to answer the questions that follow. (2 marks each) [pic] a. What type of curves are these? Do these curves show a positive or negative correlation between price and quantity? The...
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...ASSIGNMENT Course Code | BBM501/03 | Course Title | Economic Environment of Business | Student Name | Yong Shio Ping, Alene | Student ID No. | 041110362 | Student IC No. | 780205-14-6346 | Name Of Tutor | Pn Malar Arasi A/P Sundaram | Class Code | 4ENV1 | TMA No. | 1 | TMA Submission Date | September 5, 2011 | PART A (Case Scenario) (a) Elaborate on the causes of sugar price hike as discussed in the article above. [8 marks] The article as reported by Andrew Clark indicates that the main cause of the sugar price increase in the global commodity market occurred due to a simultaneous drop in the overall supply of sugar by the world’s largest sugar producer, Brazil, alongside a change in the supply and demand of the world’s largest consumer of sugar, India. In the case of Brazil, the world’s largest sugar producer, the drop in the supply of sugar occurred due to a period of heavy rain, as well as the decision to channel a large portion of sugarcane, an input into the production of sugar, into another industry, ethanol fuel production, hence significantly reducing the availability of this input to sugar production. Figure 1.1 below illustrates S1 as the original supply curve of sugar, and S2 as the new supply curve of sugar which has shifted to the Left. This shift to the left is caused by a decrease in sugarcane supply, an important input to sugar production. The effect is an increase in the Price of sugar due to a decrease in the quantity of sugar supplied...
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...responsibility to use the information learned from assigned reading material to apply the learned concepts to make the correct decisions. The housing market in Atlantis comprises of both detached homes and apartments. The simulation explains the supply and demand of 2 bedroom rental apartments in Atlantis. The three subjects demand curve, the supply curve, and equilibrium are explained. The impact of a price ceiling on quantity demanded and quantity supplied of two bedroom rental apartments are discussed. The closest substitute to a two bedroom apartment provided by GoodLife is a detached rental home provided by Oakridge Builders. First, the appropriate rental rate had to be chosen to bring down the vacancy rate from 28% to 15% while maximize revenue. Second, if leasing out all 2,500 apartments, the rental rate had to be decided to profitable. Though GoodLife is the monopoly in the market. The company has been able to fix the market rental rate at the company’s discretion. Simply by lowering the rental rate, it increases the quantity demanded. More quantity is demanded at a lower price. When rental rates are reduced there will be more potential tenants willing to rent apartments leading to a lower vacancy rate. As the rental rate is lowered, revenue initially increases, reaches a maximum at a particular rental rate and quantity demanded, and then decreases. There was 2,500 apartments available to lease. Current rental rate for lease was $1,100. The suggestion was to assess the possibility...
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...shift due to adjustments with prices. The simulation focused on two-bedroom rental properties. We received the expertise of Hal Morgan and Susan Hearst from Good Life Property Management to determine rental prices and how to balance out the supply and demand. Through the simulation, I was able to see that when the rental price of the apartments decreased, there would be an increase in the demand for the apartments. Furthermore, if the price of the apartments increased, then there would be a decrease in the demand. However, to balance out the supply and demand, there needed to be a shift in either the supply or demand. Throughout the simulation there were a few concepts that dealt with macroeconomics as well as microeconomics. As learned from a previous course, macroeconomics examines nation-level economic facts like GDP, unemployment, foreign trade, and so on. Colander (2010) defines it as the study of the economy as a whole. It considers the problems of inflation, unemployment, business cycles, and growth (p.15). However, microeconomics deals with individuals, families, and companies. Colander defines it has the study of how individual choice is influenced by economic forces (Colander, p.15). One concept in the simulation that dealt with macroeconomics was when there was a price ceiling enforced. As explained by Colander, a price ceiling is a governmental-imposed limit on high a price can be charged, which is usually below the equilibrium price. This is a macroeconomic concept...
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... Frederieke Dijkhuizen Microeconomics Chapter 1. The fundamentals of managerial economics Manager: a person who directs resources to achieve a stated goal. Economics: the science of making decisions in the presence of scarce resources. Managerial economics: the study of how to direct scarce resources in the way that most efficiently achieves a managerial goal. Economic profits: the difference between total revenue and total opportunity cost. Opportunity cost: the explicit cost of a resource plus the implicit cost of giving up its best alternative use. The five forces framework -‐ Entry -‐ Power of input suppliers: industry profits tend to be lower when suppliers have the power to negotiate favourable terms for their inputs. -‐ Power of buyers: industry profits tend to be lower when consumers have the power to negotiate. -‐ Substitutes and complements -‐ Industry rivalry: rivalry...
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...California University of Business and Technology School of Management Studies BA 360 Principles of Microeconomics Table of Contents Chapter 1 Ten Principles of Economics 3 Chapter 2 Thinking Like an Economist 7 Chapter 3 Interdependence and the Gains from Trade 10 Chapter 4 The Market Forces of Supply and Demand 13 Chapter 5 Elasticity and Its Application 20 Chapter 6 Supply, Demand, and Government Policies 26 Chapter 7 Consumers, Producers, and Efficiency of Market 31 Chapter 8 Application: The Costs of Taxation 35 Chapter 9 Application: International Trade 39 Chapter 10 Externalities 42 Chapter 11 Public Goods and Common Resources 45 Chapter 12 The Design of the Tax System 47 Chapter 13 The Costs of Production 49 Chapter 14 Firms in Competitive Markets 53 Chapter 15 Monopoly 57 Chapter 16 Monopolistic Competition 61 Chapter 17 Oligopoly 64 Chapter 18 The Markets for the Factors of Production 68 Chapter 19 Earnings and Discrimination 73 Chapter 20 Income Inequality and Poverty 76 Chapter 21 The Theory of Consumer Choice 79 Chapter 22 Frontiers of Microeconomics 82 Chapter 1 Ten Principles of Economics I. Significance * How people make decisions * How people interact * How the economy as a whole works II. Highlights The word economy comes from the Greek word oikonomos, which means "one who manages a household." A household faces many decisions, which...
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...restrict total imports to q3 − q2 units—what they would have been under the tariff—what impact would this have on the product price for home-country consumers and producers? Explain. b. Under a quota system, the government issues import licenses giving the holder the right to import one unit of the good. How much revenue can the government earn if it sells all q3 − q2 licenses to the highest bidder? Illustrate your answer on your diagram. c. What impact does this quota system have on home-country welfare? Who gains, who loses, and by how much? Illustrate your answer on your diagram. d. Which is a better way to restrict free trade—quotas or tariffs? Is the welfare loss under this quota system larger or smaller than the loss under a tariff with identical effects on import volume? Explain your answer. Answer: a. The supply curve shifts out, horizontally, by the amount of the quota, to Sdomestic + quota. This has no impact on price, compared to the tariff. The price remains[pic]with the quota. [pic] b. We know foreign firms' average costs of production are p*, so, if the licenses are free, foreign firms make a positive economic profit equal to [pic] per unit. Therefore, foreign firms will bid the price of a license up to [pic] and still earn a normal economic profit on all of their exports. c. Consumers lose the entire shaded area,...
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...Simulation January 17, 2013 ECO/365 William Mason A number of factors, including price increases or decreases, cause changes in supply and demand. An incremental decrease in the rental price led to a huge increase in the demand for houses. Similarly, an increase in the rental price of two roomed apartments caused a decrease in the demand of houses by a significant margin. Suppliers were willing to supply more houses at higher prices and fewer ones at reduced rents (McDowell et al., 2006). A rise in the population of Atlantis led to a greater demand for housing which in turn contributed to the rise in rental prices as demand-outstripped supply. As a consequence, the suppliers were eager to supply more units at improved rental prices. When the population decreased, the demand for housing fell and the available units were leased out at low prices. Naturally, the suppliers were not very keen to supply all their units to the market at depressed prices. Available substitutes affect the demand and supply of a commodity. A number of people in Atlantis owned homes in the suburbs and did not need to rent houses in the town. The demand for houses dropped and this forced the suppliers to cut back on supply or reduce rents in bid to attract more clients. Consumer tastes and preferences affect the supply and demand of goods and services in the market (McDowell et al., 2006). When consumer trends shifted from two roomed apartments to detached houses, the shift in demand for apartments...
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