1. E-con

2. Intro to E-con Economics is the study of scarcity and choice. At its core, economics is concerned with how people make decisions and how these decisions and actions interact with one another to determine what happens at the level of the entire economy.

3. Microeconomics & Macroeconomics Microeconomics is the study of how people make decisions and how these decisions interact. Macroeconomics is the overall performance of the economy. Both make up the economy.

4. Fundamental Economic Concepts Scarcity: Resources are limited and human desires are insatiable. Trade-offs: We give up something to get something else. Opportunity cost: The second best alternative to what you obtained. Rationality: The costs and benefits of what the actions will be. Gains from Trade: People can get more of what they want through trade than they could if they tried to be self- sufficient.

5. Models and Economic Theory Models are simplified representations used to better understand a real-life situation. Models most often consist of diagrams or mathematical formulas. The simplicity and lack of realism of many of these models is what allows to identify so clearly what assumptions and characteristics are important.

6. Positive Economics and Normative Economics Positive economics: Using economic analysis to describe and explain economic phenomena and to make predictions about possible outcomes. Cause and Effect. Normative economics: Using economic analysis to guide decisions about what should be as opposed to what is the case.

7. Efficiency as a Goal! Pareto efficiency describes a situation in which the only way that anyone can be made better off is by reducing the well being of another.

8. Market A market is comprised of all of the buyers and sellers of a particular good or service. The interaction of supply and demand in markets is the central topic of microeconomics. A market is perfectly competitive if there is a large number of buyers and sellers of a particular good or service and if all the participants are well informed of the market price.

9. Demand! The quantity demanded of any good is the amount of that good that buyers are willing to pay or able to purchase. If the price of a particular good is higher, buyers will demand less; if the price is lower, then they will demand more. This relationship is known as the Law of Demand.

10. Demand terms Demand Curve: A graph representing the quantity of a good or service demanded as a function of a graph. Demand Schedule: A table showing the relationship between the price of a good or service and the quantity demanded.

11. Shifts in the Demand Curve Certain factors can affect the Demand Curve Income- Demand is positively related to income The prices of related goods- Substitutes & Complements Tastes- The benefits of consumption Expectations- Expecting changes in the future Number of buyers

12. More terms! Money- Medium for exchange, unit of account, and store of value Normal goods- A good or service for which demand is positively related to the buyer's income Inferior goods-A good for which the quantity demanded falls as buyer's income increases Substitutes- two goods for which an increase in the price of one leads to an increase in the demand of the other Complements- two goods for which a rise in the price of one leads to a decline of the other.

13. Supply!!! The quantity supplied of any good is the amount that sellers of that good are willing and able to produce. The price that suppliers receive greatly impacts the supply. Law of Supply: The positive relation between price and quantity supplied. Supply Curve: A graph representing the quantity of a good or service supplied as a function of the price.

14. Shifts in the Supply Curve Certain factors can influence the S.C. Input Prices- Anything that the supplier has to purchase in order to supply a product Technology- Affects how businesses operate Expectations- If prices are expected to rise, then they will reduce the amount currently supplied. Number of sellers in a certain market- More sellers= Quantity supplied + Less sellers= Quantity supplied -

15. Equilibrium Equilibrium- A point at which all the working forces in a system are balanced by other forces. Thus a a stable and unchanging situation. Market Equilibrium occurs at the combination of price and quantity where the market supply and demand curves intersect.

16. The Characteristics of Competitive Market Equilibrium Competitive Markets- A market with many buyers and sellers trading a similar good or service in which each buyer and seller is a price taker. The competitive market equilibrium maximizes the combined benefits or total surplus of market participants.

17. And more terms! Consumer surplus- Producer surplus- Total surplus-