What is economics?
The study of how societies allocate scarce resources
What are the Four Major Resources?
What type of economy is the US?
How does opportunity costs differ from normal costs?
Opportunity costs include both monetary costs and non-monetary costs.
Statement of facts which can be proven or disproven
Subjective statements about the economy and how things should be. Opinion-based.
What is a market?
a group of buyers and sellers of a particular product
What is the law of demand?
As price falls, quantity demand rises
Two goods are substitutes if..
An increase in the price of one causes an increase in the demand for the other
Two goods are complements if..
an increase in the price of one causes a decrease in the demand for the other
What is the law of supply?
The claim that the Qs of a good increases when the price of the good rises
General Formula for Elasticity:
% Change in Q
% Change in Price
Cross-Price elasticity of demand and formula:
%CHANGE IN Qd for 1
% Change in price of Good 2
Why would the gov't be involved in the market?
1. Raise Revenue for operations
2. Influence Consumer Behavior
3. Improve equity
Total Revenue =
Price of Good x Quantity Supplied
The manner in which the burden of a tax is shared among participants in a market
Demand for a normal good is ______ related to income