Summary: Economics | 9781787260948 | Karl E Case Ray C Fair, et al

Read the summary and the most important questions on Economics | 9781787260948 | Karl E. Case Ray C. Fair and Sharon M. Oster

• 1 The scope and methods of economics

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• What is an opportunity cost?

  The value of other things you could have done with that same amount of money and time you spend on another activity. (E.G. Going to a movie)

• What is 'efficient markets' or 'no free lunch'?

  A market in which profit opportunities are eliminated almost instantaneously.

• 2 The economic problem: Scarcity and choice

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• What are the 3 main questions to be asked in the economic problem?

  -What needs to get produced?
  - How will it be produced?
  - To whom is it distributed?

• What is the difference between an absolute and a comparative advantage?

  - A producer has an absolute advantage if he can produce a good or service using fewer resources than the rest. (lower absolute cost/unit)
  
  - A producer has a comparative advantage if he can produce its product at a lower opportunity cost than others.

• 3 Demand, supply and market equillibrium

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• What factors affect what you buy and how much you buy from it?

  - Price of the product
  - Income available
  - Amount of accumulated wealth
  - Prices of other products (substitutes & complementary goods)
  - Tastes and preferences
  - Expectations about future income, wealth & prices      
  
  Quantity demanded= The amount of a product that a household would buy in a given period if it could buy all it wanted at the current market price(<-> availability)

• What is the law of demand?

  The negative realtionship between price and quantity demanded.

• What are normal and inferior goods?

  - Demand of a product goes up when income goes up.
  - Demand for products fall when income rises.

• What factors affect the output supply decision?

  - Cost of producing the product (input & technology)
  - Prices of the product
  - Prices of related products 
  - Time / capacity (short run vs long run)
  
  Quantity supplied= The amount of a product that firms would be willing and able to offer for sale at a particular price during a given time period.

• When does a shift of a supply curve occur?

  Changes in: 
  -Price of required input (labour, capital, land)
  -Technologies
  -Prices of related products

• What is market equillibrium?

  The condition that exists when quantity supplied and quantity demanded are equal. There is no tendency for price change.