econ

• Economics is the study of how humans make decisions in the face of scarcity 
• Economics is the study of how society manages its scarce resources
• Economics is the study of the choices people make to attain their goals, given their scarce resources
• Command Economy: Government decides: 1) what to produce; 2) how will goods and services be produced; 3) what prices to charge
• Market Economy: Market decides: 1) what to produce; 2) how will goods and services be produced; 3) what prices to charge
• Quantities of a good or service that producers are willing to sell at all possible market prices
• Quantity Supplied (Qs) : - the total number of units of a good or service producers are willing to sell at a given price (P )
• Market: Interaction between potential buyers and sellers- A combination of demand and supply
• Prices tell how much consumers want to buy and how much producers want to sellDemand and supply determine the price
• Opportunity Cost: what one must give up to obtain what he or she desires
• Scarcity = Limited Resources ! Make Choices When making choices ! people face tradeoffs
• Incentive: Something (such as the prospect of a punishment or reward) that induces a person to act
• Substitutes Good: Goods that satisfy a similar need or desire (e.g., tea vs. coffee, playstation vs. Xbox, android vs. iphone)
• Complementary Good: Goods that are used jointly (e.g., coffee + sugar, phone + sim-card, car + gas)
• Normal Good: Increases in income will result in an increase in demand
• Inferior Good: Increases in income will result in a decrease in demand
• Demand: The desire, willingness, and ability to buy a good or service.
• Consumer Surplus(CS) : The difference between what consumers are willing to pay and what they actually pay
• Producer Surplus (P S): The difference between the actual price a producer receives and the minimum acceptable price
• Market Efficiency: Total surplus is maximized (i.e., impossible to produce greater CS without reducing P S or vice versa)
• Deadweight Loss: The loss in total surplus that occurs when the economy produces at an inefficient quantity
• Self Interest & Invisible Hand - Freedom to produce and exchange goods
• Microeconomics: Focuses on the actions of individual agents within the economy, like households, workers, and businesses.
• Macroeconomics: Focuses on economy-wide phenomena such as growth, unemployment, inflation, and trade balance.
• Marginal Analysis: Examining the benefits and costs of choosing a little more or a little less of a good 
• When a market is not efficient, government intervention can improve society’s welfare
• • Command Economy: Government decides: 1) what to produce; 2) how will goods and services be produced; 3) what prices to charge
• Market Economy: Market decides: 1) what to produce; 2) how will goods and services be produced; 3) what prices to charge
• There are two main ways that societies organize an economy (or Economic Systems) 1. command economy 2. market economy
• What are the three ways to reduce scarcity?

  1. Produce more2. Use resources wisely ⇒ Efficiency 3. Reduce Wants
• Normative statements: Describe how the world should be. These state- ments are subjective ques- tions of opinion.
• Positive statements: De- scribe the world as it is. These are factual