Econ 142 1st Edition Lecture 2 Outline of Last Lecture I. Normative vs Positive, defining economicsOutline of Current Lecture II. Opportunity CostA. Definition of opportunity costIII.Market EconomyIV.Productive Efficiency vs Allocative Efficiency V. Demand: Curve ShiftersCurrent Lecture1. Opportunity cost: the HIGHEST valued alternative that you did not do. A. Example from sample questions: You've enrolled in a class that meets for 48 hours during the semester. The price you paid for the class was $1000. Instead of attending class you could have waited tables for $14/hour, or engine tune-ups for $15/hour. Waiting tables would be: $14*48= $672. Engine tune-ups:$15*48=$720. Opportunity cost is the highest value of what you did not do, so the opportunity cost would be the engine tune-ups for $720.2. Market Economy: a good or service produced or not produced based on demand and supply. B. A market is a set of buyers and sellers whose actions affect the price of a product or service.C. A centrally planned economy is when economic decisions are made by the state orgovernment.3. Productive Efficiency vs Allocative Efficiency: Productive efficiency is when goods and services are produced for the lowest cost. Allocative efficiency occurs when the marginal benefit equals the marginal cost. 4. Demand CurveA. The demand curve will always slope down. Law of demand: at lower prices, a larger quantity will be demanded. At higher prices, smaller quantities will be demanded. As the price changes the quantity demanded will change. All elseheld equal (ceberis paribus)B. Change in price causes movement ALONG the curve which changes the quantity demanded.C. Things that Affect the Demand Curve: whole curve shifts=change in demand1. Change in income: if income increases, demand shifts right. If income decreases, demand shifts left. Inferior good: ramen, Nominal good: steak2. Change in price of related goods: compliments-buy together and use together like hot dog buns and hot dogs. Substitutes-buy only one. 3. Change in taste or preferences4. Change in expectations: if a buyer expects price to be higher in the future, demand will shift right. The buyer would demand more before price goes up (gas)5. Population and Demographics: the number of buyers affect demand. If population decreases, demand will decrease.These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a