Principles of Economics Chapter 1
Keynotes & Summary
Introduction to Economics:
All the things we chose & do in the economic world is made up from our
self-interest.
Scarcity -> our inability to get everything we want. We want more then
we can get.
Incentive -> something that en/discourage an action
Microeconomics -> studies of choices that individuals and businesses
make. (more music downloaded)
Macroeconomics -> study of choices that being made in the national
economy and the global economy. (Reason of unemployment in a country)
Goods -> physical objects (tennis racket)
Service -> actions performed by people (cutting hair)
Factors of production goods & services;
Land, natural resources
Labour, the time people devote on producing goods and services
Capital, tools businesses use to produce goods and services
Entrepreneurship. new idea’s and human resources of people
Efficient -> making all the parties better of with some decisions.
Globalization -> expansion of international trade, borrowing & lending
and investment.
Trade-off -> giving up one thing for another.
Marginal benefit -> benefit that arises from increase in an activity.
(higher grade)
Marginal cost -> the cost you pay to do something. (not going out with
friends)
How to get the slope of a relation?
Y*/X*
Y* = the change in value on Y-as
X* = the change in value on X-as
Equation describing a linear relation: y= a+bx
,Principles of Economics Chapter 3
Keynotes & Summary
Demand and Supply:
Relative price -> ratio of one price to another
Competitive market -> market with many buyers, so no single one can
influence the price.
Quantity demanded of good/service -> amount consumer plan to pay
during a period.
Demand -> refers to entire relationship between the price of the good and
the quantity asked for of the good.
Six factors bring changed in demand:
Prices of related goods
Expected future prices
Income
Expected future income or credit
Population
Preferences
Substitute -> a good that can be used in place of another good. (Bus
instead of train)
Complement -> is a good that is used in combination with another good.
(Fish &chips, energy drink & exercises.
Normal good -> good of which demand increases as income increases.
Inferior good -> goods of which demand decreases when income
decreases.
Quantity supplied -> amount produces plan to sell during a given
period.
Supply -> refers to the entire relationship between the quantity supplied
and the price of a good.
Six factors bring changes in supply:
Prices of factors of production
Prices of related goods produced
expected future prices
Number of suppliers
Technology
The state of nature, for example: good weather increase supply, bad
decreases.
Equilibrium price-> price at which the quantity demanded equals the
quantity supplied.
, Equilibrium quantity -> quantity bought and sold at the equilibrium
price.
Demand:
- When demand increases, both price and the quantity increase.
- When demand decreases, both price and the quantity decrease.
Supply:
- When supply increases, the quantity increase and the price falls.
- When supply decreases, the quantity decreases and the price rises.
All possible changes in demand and supply (figures pg 71)
Movements along the demand curve->
Pg 59.
Principles of Economics Chapter 11
Keynotes & Summary
Perfect competition ->
Many firms sell identical products to many buyers
There are no restrictions on entry into the market
Established firms have no advantage over new ones
Sellers and buyers are well informed about prices
A firm’s minimum efficient scale -> smallest quantity of output at
which long-run average cost reaches it lowest level.
In perfect competition, each firm produces a good or service that has no
unique characteristics, so consumers don’t care which firm’s good they
buy.
Price taker -> is a firm that cannot influence the market price because its
production is an insignificant part of the total market.
Maximum economic profit -> total revenue minus total cost.
Total cost -> opportunity cost of production, which includes normal
profits.
Marginal revenue -> change in total revenue that results from a one-
unit increase in the quantity sold. Calculate: change in total revenue:
change in quantity sold.
Total revenue -> price multiplied by the quantity sold.
Marginal revenue -> change in total revenue that results from a one-
unit increase in quantity sold.
The firms can sell any quantity it chooses at the market price. So the
demand curse for the firm’s product is a horizontal line at the market
price, the same as the firm’s marginal revenue curve.
Economic profit -> total revenue – total cost.
Economic profit increases if output increases. Profit decrease, output
increase -> Output decrease, profit increase -> Output decrease.
Marginal revenue = marginal cost = maximum profit.
Keynotes & Summary
Introduction to Economics:
All the things we chose & do in the economic world is made up from our
self-interest.
Scarcity -> our inability to get everything we want. We want more then
we can get.
Incentive -> something that en/discourage an action
Microeconomics -> studies of choices that individuals and businesses
make. (more music downloaded)
Macroeconomics -> study of choices that being made in the national
economy and the global economy. (Reason of unemployment in a country)
Goods -> physical objects (tennis racket)
Service -> actions performed by people (cutting hair)
Factors of production goods & services;
Land, natural resources
Labour, the time people devote on producing goods and services
Capital, tools businesses use to produce goods and services
Entrepreneurship. new idea’s and human resources of people
Efficient -> making all the parties better of with some decisions.
Globalization -> expansion of international trade, borrowing & lending
and investment.
Trade-off -> giving up one thing for another.
Marginal benefit -> benefit that arises from increase in an activity.
(higher grade)
Marginal cost -> the cost you pay to do something. (not going out with
friends)
How to get the slope of a relation?
Y*/X*
Y* = the change in value on Y-as
X* = the change in value on X-as
Equation describing a linear relation: y= a+bx
,Principles of Economics Chapter 3
Keynotes & Summary
Demand and Supply:
Relative price -> ratio of one price to another
Competitive market -> market with many buyers, so no single one can
influence the price.
Quantity demanded of good/service -> amount consumer plan to pay
during a period.
Demand -> refers to entire relationship between the price of the good and
the quantity asked for of the good.
Six factors bring changed in demand:
Prices of related goods
Expected future prices
Income
Expected future income or credit
Population
Preferences
Substitute -> a good that can be used in place of another good. (Bus
instead of train)
Complement -> is a good that is used in combination with another good.
(Fish &chips, energy drink & exercises.
Normal good -> good of which demand increases as income increases.
Inferior good -> goods of which demand decreases when income
decreases.
Quantity supplied -> amount produces plan to sell during a given
period.
Supply -> refers to the entire relationship between the quantity supplied
and the price of a good.
Six factors bring changes in supply:
Prices of factors of production
Prices of related goods produced
expected future prices
Number of suppliers
Technology
The state of nature, for example: good weather increase supply, bad
decreases.
Equilibrium price-> price at which the quantity demanded equals the
quantity supplied.
, Equilibrium quantity -> quantity bought and sold at the equilibrium
price.
Demand:
- When demand increases, both price and the quantity increase.
- When demand decreases, both price and the quantity decrease.
Supply:
- When supply increases, the quantity increase and the price falls.
- When supply decreases, the quantity decreases and the price rises.
All possible changes in demand and supply (figures pg 71)
Movements along the demand curve->
Pg 59.
Principles of Economics Chapter 11
Keynotes & Summary
Perfect competition ->
Many firms sell identical products to many buyers
There are no restrictions on entry into the market
Established firms have no advantage over new ones
Sellers and buyers are well informed about prices
A firm’s minimum efficient scale -> smallest quantity of output at
which long-run average cost reaches it lowest level.
In perfect competition, each firm produces a good or service that has no
unique characteristics, so consumers don’t care which firm’s good they
buy.
Price taker -> is a firm that cannot influence the market price because its
production is an insignificant part of the total market.
Maximum economic profit -> total revenue minus total cost.
Total cost -> opportunity cost of production, which includes normal
profits.
Marginal revenue -> change in total revenue that results from a one-
unit increase in the quantity sold. Calculate: change in total revenue:
change in quantity sold.
Total revenue -> price multiplied by the quantity sold.
Marginal revenue -> change in total revenue that results from a one-
unit increase in quantity sold.
The firms can sell any quantity it chooses at the market price. So the
demand curse for the firm’s product is a horizontal line at the market
price, the same as the firm’s marginal revenue curve.
Economic profit -> total revenue – total cost.
Economic profit increases if output increases. Profit decrease, output
increase -> Output decrease, profit increase -> Output decrease.
Marginal revenue = marginal cost = maximum profit.
