Economics is the study of how people get the goods and services they need and want. It is not just about money, although money does play a significant role. Economics is about the choices we make every day.
Macroeconomics --- looks at the big picture of communities, nations, and global decision making.
Microeconomics --- looks at the smaller picture of individuals and businesses.
Three Economic Questions: 1) What will be produced? 2) How will it be produced? 3) For Whom will it be produced?
Scarcity forces us to make choices. There are trade-offs associated with any choice we make, but there are also benefits like earning an A in Economics. Trade-offs can also be called costs of the choice made. The most valuable trade-off, the one you truly gave up (like extra sleep), is the opportunity cost. Remember that opportunity cost is the most valued trade-off; it is the next best option that you give up. Note, however, that an opportunity cost’s value is not just money and time. Value also includes the experience that you give up.
We say that the quantity demanded (QD) has increased when people purchase more of a product.
When we list the various amounts that people will pay for a certain item, we can create a demand schedule. Based on this schedule we can draw a graph to illustrate overall demand for the good or service. Demand (D), the total amount of a good or service that people are willing to buy, is the ―whole curve‖—overall demand for a good or service at all prices. Quantity demanded, however, is a specific point on the curve, showing how much will be purchased at a specific price. So when price changes, only the quantity demanded changes as a result.
When the price for a ―good‖ like gasoline or a cell phone goes down, people will typically purchase more of it
What events would cause the whole demand curve to shift? (Left is less. Right is More.)
Module 1 Review Guide
Supply is the ―whole curve,‖ supply for goods and services at all prices, while quantity supplied is a
―specific point‖ on the curve, showing how much will be produced at a specific price. Suppliers will typically produce more of a good when the price rises. (looking to make the most profit possible)
What events would cause the whole supply curve to shift? (Left is less. Right is More.)
The point where the supply and demand curves meet (also known as the equilibrium point) identifies the equilibrium price. This is how much suppliers should charge for their product.
When price is higher than the equilibrium price then too much will be produced so there is a surplus (not as many people will want the good due to the higher price).
When price is lower than the equilibrium price then not enough will be produced so there is a shortage (demand will increase due to the lower price, but supply will not due to need to cover costs at a lower profit margin).
Four Functions of Money: “Money is a matter of functions four—a