Caldwell BU 385 - ECONOMICS (40 pages)

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ECONOMICS



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ECONOMICS

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Lecture Notes


Pages:
40
School:
Caldwell University
Course:
Bu 385 - Senior Outcomes Seminar
Senior Outcomes Seminar Documents

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SENIOR OUTCOMES SEMINAR BU385 ECONOMICS 1 BASIC CONCEPTS IN ECONOMICS I Opportunity costs Equilibrium of supply QS and demand QD Price elasticity of demand Marginal costs revenues and profits Economies of scale and scope 2 BASIC CONCEPTS IN ECONOMICS I Sunk costs and barriers to entry Profit maximization by a competitive firm Profit max by a monopoly and oligopoly Pricing policies Externalities 3 A rational reasonable decision suits interests of the decision maker The opportunity cost of the rational decision is the value of the next best alternative that is sacrificed because of this decision 4 Essence of the opportunity cost Under scarcity no gains without pains i e each gain involves some loss The value of the gain is determined by a ratio between its market price and the market price of the sacrificed next best alternative option 5 Equilibrium of QS and QD is a price P such that QS P QD P At equilibrium Quantity supplied Quantity demanded Prices are information signals that push QS and QD towards equality 6 Supply and Demand for New Motor Vehicles Graph illustrates market equilibrium in new motor vehicle market At a price of 28 500 buyers are willing to purchase 16 5 million vehicles At same price vehicle manufacturers are willing to produce 16 5 million vehicles Market is in equilibrium since quantity demanded equals quantity supplied Equilibrium of QS and QD is a price P such that QS P QD P P P1 P2 QD QS Surplus at P1 Deficit at P2 8 Shifts of DD curves P Rightward Population up Incomes up QD QS Leftward Population down Incomes down 9 Demand For Cement A construction boom in China increased the world demand for cement As a result there was a shift to the right in the demand curve for cement with the market equilibrium going from point A to point B Shifts of SS curves P Rightward Size of industry up Tech progress up Relative prices of inputs down QD QS Leftward Size of industry down Tech progress down Relative prices of inputs up 11 Supply Shift Market for



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