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Endogenous variable
Theory exists to explain the variables
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Exogenous variable
Givens, not a result in the theory
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Opportunity Cost
The best alternative taht we forgo, or give up, when we make a choice or a decision.
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Positive economics
An apporoch that attempts to understand behavior and the oporation of systems withour making judegments. decscribes what exists and how it works.
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Normative economics
An approach to economics that anylyes outcomes of economic behavior, evaluates them as good or bad and may perscirbe courses of action. AKA policy economics.
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Detrerminants of demand
- Change in income
- Change in Tastes
- Change in prices of related goods
- Change in buyers
- Expected future change in price
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Normal Good
Income goes up, Demand goes up
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Inferior goods
Income goes up, demand goes down
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Substitutes
Price of one substitute increase then the demand for the other substitute increases.
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Complements
Price of one complement increases then the demand for the other complement decrease
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Determinants of Supply
- Input price
- Change in number of sellers
- Technology
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Law of Supply
An increase in market price will lead to an increase in quantity supplied and visa versa.
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Law of demand
As prices rise, quantity demanded decreases and visa versa.
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