Micro vs Macro
Micro vs. Macro Economics
Micro-indiidual consumers/firms
Macro-economic aggregates-GDP, inflations, unemployment
Markets-opportunity for exchange
1) Opportunity Costs-value of the next best for gone alternative when a decision is made -all decisions involve an opportunity cost (assuming the firm operates efficiently)
2) Marginal Analysis-analyze situations involving incremental change
-marginal: something is changing by a small amount (incremental/one-unit change)
3) Laws of supply and demand-very powerful & if you interfere w/them there will be negative consequences
4) Trade off between economic efficiency & economic equality
5) Mutual gains through voluntary exchange -if transactions occur & they’re voluntary then all parties must benefit otherwise the transaction won’t occur
6) Extranality-someone outside of a transaction that’s affected by that transaction
Production Possibility Frontier (PPF/PPC)-shows all combinations of 2 goods that CAN BE produced w/currently available resources & technology *wheat&soybeans graph example
Notes:
1) PPF slopes down why? Limited resources
2) MOST PPF’s are curved out from the origin why? b/c resources tend to be specialized
Principle of increasing marginal opportunity cost- as out put increases, the opportunity cost of production increases w/each unit
*wheat&soybeans graph example
PPF shifts w/increased resources and/or improvements in technology
Capital goods-good used to make another good consumer goods-good purchased for own use
-those economies that emphasize production of capital goods tend to grow faster
6/22/10
Demand-is NOT a #-it IS a collection of price/quantity combinations showing how much of a good/service a consumer is willing & able to purchase at various prices
EX) Quantity Price 10 8 5 13 11 4 16 14 3 20 18 2 27 25 1.50(25=quantity demand-specific # corr. to a specific price) 34 32 1 50 48 .25
Micro-indiidual consumers/firms
Macro-economic aggregates-GDP, inflations, unemployment
Markets-opportunity for exchange
1) Opportunity Costs-value of the next best for gone alternative when a decision is made -all decisions involve an opportunity cost (assuming the firm operates efficiently)
2) Marginal Analysis-analyze situations involving incremental change
-marginal: something is changing by a small amount (incremental/one-unit change)
3) Laws of supply and demand-very powerful & if you interfere w/them there will be negative consequences
4) Trade off between economic efficiency & economic equality
5) Mutual gains through voluntary exchange -if transactions occur & they’re voluntary then all parties must benefit otherwise the transaction won’t occur
6) Extranality-someone outside of a transaction that’s affected by that transaction
Production Possibility Frontier (PPF/PPC)-shows all combinations of 2 goods that CAN BE produced w/currently available resources & technology *wheat&soybeans graph example
Notes:
1) PPF slopes down why? Limited resources
2) MOST PPF’s are curved out from the origin why? b/c resources tend to be specialized
Principle of increasing marginal opportunity cost- as out put increases, the opportunity cost of production increases w/each unit
*wheat&soybeans graph example
PPF shifts w/increased resources and/or improvements in technology
Capital goods-good used to make another good consumer goods-good purchased for own use
-those economies that emphasize production of capital goods tend to grow faster
6/22/10
Demand-is NOT a #-it IS a collection of price/quantity combinations showing how much of a good/service a consumer is willing & able to purchase at various prices
EX) Quantity Price 10 8 5 13 11 4 16 14 3 20 18 2 27 25 1.50(25=quantity demand-specific # corr. to a specific price) 34 32 1 50 48 .25