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Definitions and Diagrams,[object Object],Section 1 and 2,[object Object]
Section 1,[object Object],Introduction to Economics,[object Object]
Macroeconomics ,[object Object],The study of economy wide activity. ,[object Object],For example: A study on the the unemployment in Uganda. ,[object Object]
Microeconomics ,[object Object],The study of individual Markets,[object Object],For example: The supply of Cadbury Chocolate in Rokko Island supermarkets. ,[object Object]
Normative Economics ,[object Object],    Economics that works to alter the state of the world and its economic welfare; the opposite of positive economics,[object Object],For example: Studying ways to cut the unemployment rate in Australia. ,[object Object]
Positive Economics ,[object Object],    Statement of fact; can be proven or disproven; examine how an economy functions ,[object Object],    For example: There was a 5% increase in demand in Japan from 2009 to the 2010 fiscal year for Coca Cola. ,[object Object]
Scarcity ,[object Object],    A lack of resources in terms of the consumer demand. ,[object Object],For example: There is a scarcity of water in the Democratic Republic of Congo. ,[object Object]
Marginal Utility,[object Object],	The satisfaction a consumer gains from consuming one extra unit,[object Object],	For example: If someone eats a chocolate bar and are happy about eating it, they might not be as happy to eat a second chocolate bar. ,[object Object]
Market Economy ,[object Object],	An economy where supply and demand dictate how resources are allocated; individuals dictate the allocation of resources rather than the government,[object Object],	For example: The United States runs a system that has many similarities to a market economy. ,[object Object]
Mixed Economy ,[object Object],	An economy in which the allocation of resources are dictated by both individuals and the government ,[object Object],	For example: New Zealand runs a system with government ownership and individual ownership coincide. ,[object Object]
Command Economy,[object Object],	An economy where the government dictates the allocation of resources,[object Object],	For example: The Soviet Union was a system similar to that of a command economy as the state controlled the allocation of resources. ,[object Object]
Production Possibilities Curve,[object Object], 	A PPC is an economic model that displays the total potential output; shows economic growth and how it can be achieved; shows opportunity cost ,[object Object]
PPC: Figure 1,[object Object],A,[object Object],B,[object Object],Pens,[object Object],0,[object Object],Pencils,[object Object]
Section 2,[object Object],Microeconomics ,[object Object]
Market ,[object Object],	A market is where a buyer and seller come into contact over a product or service,[object Object],	For example: Pearl dealers can meet buyers in Hong Kong over the sale of pearls,[object Object]
Demand,[object Object],	The willingness and the ability to a buy a good or service during a specific  amount of time,[object Object],	For example: There was an increased demand for iPhones in 2010. ,[object Object]
An Increase in the Demand of Snuggies,[object Object],P1,[object Object],D2,[object Object],D1,[object Object],Q1,[object Object],Q2,[object Object],0,[object Object]
Supply,[object Object],	The amount and the availability of a certain product or service to supply during a certain amount of time,[object Object],	For example: there is a constant supply of gas in Japan.                                                                                                                                                                                                                                                                                                                                          ,[object Object]
The Supply of Weapons in Afghanistan ,[object Object],S1,[object Object],S2,[object Object],Price ,[object Object],P1,[object Object],Q1,[object Object],Q2,[object Object],0,[object Object],Quantity of Military Goods,[object Object]
Law of Demand ,[object Object],	As the price of a product or service decreases, the demand for the product or service will increase and vice versa.,[object Object],	For example: If the price of Meiji chocolate decreases from 110 yen to 100 yen, its demand will decease. ,[object Object]
Law of Supply,[object Object],	As the price of a product or service falls, so will its supply and vice versa. ,[object Object],	For example: If Meiji’s chocolate price falls 10 yen to 100 yen, then so will its supply. ,[object Object]
Maximum Price,[object Object], 	A maximum price is a price ceiling which imposes that a good or service cannot be sold above that price. ,[object Object],	For example: If the government sets a price ceiling on oil at $5.10 a gallon, it cannot be sold above that price. ,[object Object]
Minimum Price,[object Object],	A minimum price or a price floor dictates that a good or service cannot be sold at below that price. ,[object Object],	For example: If ice cream is has a price floor of $1.30 then the ice cream cannot be sold below that price. ,[object Object]
Shortages and Surpluses,[object Object],S,[object Object],Surplus,[object Object],P2,[object Object],P,[object Object],r,[object Object],I,[object Object],ce,[object Object],Market Clearing Price,[object Object],P1,[object Object],P3,[object Object],Shortage,[object Object],D,[object Object],0,[object Object],Quantity,[object Object]
Elastic,[object Object],	A good or service that is responsive to change,[object Object],	For example: Fish at a market are elastic depending on the amount caught each day.,[object Object]
Inelastic,[object Object],	A good or service that is not response to change,[object Object],	For example: There is only one Oprah Winfrey and she is always going to be Oprah. She is unique. ,[object Object]
Price Elasticity of Demand,[object Object],	It is a measure of the responsiveness of a good or service’s quantity demanded,[object Object],	For example: The PED of a Hummer will be different to that of Blue Marlin. ,[object Object]
Cross elasticity of Demand,[object Object],	XED measures the responsiveness of one good or service after a change in price of another good or service,[object Object],	For example: Meiji chocolate might change in price after Cadbury chocolate changes in price. ,[object Object]
Income elasticity of demand,[object Object],	Income elasticity of demand measures the responsiveness of the demand of a good or service in response to a change in income,[object Object],	For example: YED would measure the demand for Porche’s following a drop in average income earnings. ,[object Object]
Price Elasticity of Supply,[object Object],	PES measures the responsiveness of the good or service supplied given a change in the price of that good or service,[object Object],	For example: PES would measure the supply demanded of a Porche after its price increased. ,[object Object]
Complimentary Goods,[object Object],	A complimentary good is a good or service that if a related product experiences an increase in demand, the complimentary good will also experience an increase in demand and vice versa,[object Object],For example: Ketchup and fries are complimentary goods. ,[object Object]
Supplementary goods,[object Object],	Supplementary goods are good or services that if a supplementary good experiences an increase in demand, this good or service will experience a fall in demand,[object Object],	For example: Coke and Pepsi are supplementary goods. ,[object Object]
Indirect Tax,[object Object],	An indirect tax is a sales tax; it is a tax on the bearer of the consumer of the product or service,[object Object],	For example: There is an indirect tax on chocolate in New Zealand.  ,[object Object]
Tax Incidence ,[object Object],	Tax incidence is a tax that is shared amongst a group of consumers in a market rather than an individual; dependant of elasticity ,[object Object],	For example: A tax incidence would be set on on Meiji as they are the producers of the chocolate. ,[object Object]
Theory of the Firm ,[object Object]
Costs,[object Object],Fixed costs are costs of production that do not change with the level of output. They will be the same for the one or any other number of units.,[object Object],Cost of rent, electricity ,[object Object],Variable costs are costs are costs of production that vary with the level of output.,[object Object],Cost of goods that are produced,[object Object],Total costs are the total costs of producing a certain level of output–fixed costs plus variable costs.,[object Object],Combination of rent, electricity and goods produced,[object Object]
Costs,[object Object],Average cost is the average (total) cost of production per unit. It is calculated by dividing the total cost by the quantity produced,[object Object],The total cost of producing chocolate is $1000/1000 bars produced=$1 per bar of chocolate,[object Object],Marginal cost is the additional cost of producing an additional unit of output.,[object Object],The cost of producing an extra bar of chocolate could change from $1 to $1.02 depending on various factors,[object Object]
Total Cost, Fixed Costs, and Variable Costs,[object Object],TVC,[object Object],TC,[object Object],Cost,[object Object],TFC,[object Object],Output,[object Object],0,[object Object]
The Short Run,[object Object],The short run is the period of time in which at least one factor of production is fixed,[object Object],For Meiji chocolate this could mean that they have to make chocolate using the same machines,[object Object]
The Long Run,[object Object],- The long run is the period of time in which all factors of production are variable.,[object Object],For Meiji chocolate this means that everything can change: technology, staffing, location etc. ,[object Object]
Revenues,[object Object],Total revenue is the aggregate revenue gained by a firm from the scale of a particular quantity of output (equal to price times quantity sold).,[object Object],The total amount of money that Meiji chocolate made eg. 50 sold * $3 a bar =r TR of $150,[object Object],Average revenue is total revenue received divided by the number of units sold. Usually, price is equal to average revenue.,[object Object],$150 TR / 50 bars sold = $3 a bar,[object Object],Marginal revenue is the extra revenue gained from selling an additional unit of a good or service.,[object Object],Meiji could make an extra $2.80 if they sell an extra bar of chocolate,[object Object]
Profits,[object Object],Normal profits are the amount of revenue needed to cover the total costs of production, including the opportunity costs.,[object Object],Meiji chocolate might needs $1000 dollars to cover production costs,[object Object],Abnormal profits are any level of profit that is greater than the required to ensure that a firm will continue to supply its existing good or service. (It is an amount of revenue greater than the total costs of production, including opportunity costs.),[object Object],This is anything over that $1000 dollars needed,[object Object],The profit-maximizing level of output is the level of output where marginal revenue is equal to marginal cost.,[object Object],When Meiji chocolate produces at a level where its marginal revenue is equal to that of its marginal cost,[object Object]
Normal Profit,[object Object],AC,[object Object],MC,[object Object],P,[object Object],C,[object Object],o,[object Object],s,[object Object],t,[object Object],D=AR,[object Object],Q,[object Object],MR,[object Object],Output,[object Object]
Thanks!,[object Object],	I’m sure you’ve really been reviewing if you’ve gotten this far!,[object Object]

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