Economics - allocation of scarce resources

Law of scarcity
Land unlimited needs and wants
Capital
Labor
Entrepreneurship

Scarcity types
Trade off - the excha between alternative.
Opportunity cost- the value or the cost

2economics
Positive - descriptive or explain
various economics.
Normative -the value of economics fairness.

Major divisions
Microeconomics- individual income
Macroeconomics - national income

Factors
Land - all natural resources.
Capital- anything that people produce.
Labor- physical and mental talents.
Entrepreneurship - organize the other resources.

Return
Land-rent
Capital - interest
Labor-wage
Entrepreneurship - profit

Week2

Applied economics - the use of application of economics.

The 3 basic question

What to produce? - how many /how much
How to produce?- highest efficiency /highest output
For whom to produce?-target consumer

Scarcity and resources allocation- to answers the fundamental problems.

Economics resources
Natural resources (land)
Human resources(workes)
Capital resources ( tools of production)

4 economics system
Traditional economy- it center around the family.
Command economy- government (any centralized authority)
Market economy-economy activities
Mixed economy -combines aspect of the both capitalism.
Laissez-faire - in french (leave me alone)
- Operate without checks or controls.

ExampleEconomic theories
Supply and demand(invisible hand)
Classical economics

Economic models- composed of diagrams or equations.

Adam Smith (invisible hand)

-born1723
-the Father of economics
-published 1726(invisible hand)

Karl marx(class struggle)

-born 1818
-Das kapital (1867) he explained the capitalism.

John maynard keynes and government intervention

- Born 1883
- 1936 published his work general theory of employment ,interest,and money.

Week3
Ceteris paribus, which means "holding other things constant" or "all else being equal",

THE LAW OF SUPPLY AND DEMAND

- It was developed by British economist Alfred Marshall

-The theory defines the relationship between the price of a given good or product and the
willingness of people to either buy or sell it

LAW OF SUPPLY
-as the price of a good or service increases, the quantity supplied increases, and vice
versa"

SUPPLY SCHEDULE AND DEMAND CURVE

• Supply schedule is a chart that shows the different quantities of goods/service that a
producer is willing to provide/produce to meet demand at various prices.

• Demand curve is a graphical representation of the relationship between the price of a

good or service and the quantity demanded for a given period of time.

FACTORS AFFECTING SUPPLY

1. Cost of production / cost of inputs
✓ When production costs go up, supply goes down.
✓ When production costs go down, supply goes up.
2. Changes in productivity / Technological progress
✓ When productivity goes up, supply goes up.
✓ When productivity goes down, supply goes down.
3. Changes in the number of sellers
✓More sellers in the market increases supply.
✓Fewer sellers in the market decreases supply.
4. Fiscal policy / taxes
✓Higher duty and tariff will restrict supply.
✓Lower duty and tariff will stimulate supply

LAW OF DEMAND
-as the price of a good or service increases, the quantity demanded decreases, and vice versa.

DEMAND SCHEDULE AND DEMAND CURVE

• Demand schedule shows the different quantities of goods that a consumer is willing to buy at
various prices.
• Demand curve is a graphic representation of the correlation between the price of a good or
service and the quantity consumed for a given period.

FACTORS AFFECTING DEMAND

1. Changes in income (Income effect)
✓When income goes up, consumers buy more.
✓When income goes down, consumers buy less
2. Availability and prices of substitutes (Substitution effect)
✓ If the price of product A increases significantly,consumers switch to its cheaper substitute/
alternative, thus decreasing the demand for A.
✓ If the price of product A decreases significantly, consumers of its substitute switch to it, thus
increasing the demand for A
3. Availability and prices of complementary goods
✓If the price of complementary good for product A falls, then the demand for both increases.
✓ If the price of complementary good for product A rises, then the demand for both decreases.
4. Changes in the number of consumers
✓The more buyers there are, the higher the demand.
✓The fewer buyers there are, the lower the demand.
5. Changes in tastes and preferences
✓If a product is on trend or becomes popular, the demand for it increases.
✓If a product is outdated or if an alternative becomes more popular, its demand decreases.
6. Future/ price expectations
✓ When consumers expect the price of commodities to rise, then they demand/ buy more.
✓ When people expect the price to fall, then they are discouraged to buy now. Instead, they
wait till that time comes.