ECON 201 Notes ECON201 SUPPLY 2 8 2011 04 06 2011 Supply comes from the behavior of the sellers The quantity supplied of any good is the amount that sellers are willing and able to sell at alternative prices Law of Supply the claim that the quantity supplied of a good rises when the price of the good rises other things equal Supply schedule table that shows the relationship between the price of a good and the quantity supplied Market supply sum of the quantities supplied by all sellers at each price Supply Curve Shifters input prices technology of sellers expectations Equilibrium point where supply and demand curves intersect Surplus when quantity demanded is less than quantity supplies Shortage when quantity demanded is greater than quantity supplied Chapter 4 04 06 2011 Chapter 4 Forces of Supply and Demand Competitive Market market in which there are many buyers and sellers and no individual can impact market price Quantity demanded the amount of a good that buyers are willing Law of Demand the qdemanded of a good falls when the price of a and able to purchase good rises Demand Curve Shifters o Income o Prices of Related Goods o Substitutes increase in price of one good causes an increase in demand in the other good o Complements increases in the price of one good causes a decrease in demand for the other good o Tastes o Expectations o Number of Buyers Law of Supply and Demand the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance CHAPTER 10 04 06 2011 Chapter 10 Measuring a Nation s income Macroeconomic Statistics Inflation rate at which average prices are rising GDP total income of a nation Unemployment of labor force out of work Retail sales the total spending at stores GDP measures both total income of everyone in the economy and total expenditure on the economy s output of goods and service they re the same thing Y C I G NX o Y gdp o C consumption the spending by households on goods and services with the exception of purchases of new housing o I investment spending on capital equipment inventories and structures including household purchases of new housing o G Government Purchases spending on goods and services by local state and federal governments o NX Net Exports spending on domestically produced goods by foreigners minus spending on foreign goods by domestic residents Real GDP productions of goods and services valued at constant prices Measures the increase decrease in production of goods services Nominal GDP production of goods and services valued at current prices GDP Deflator a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100 GDP Deflator Nominal GDP Real GDP X 100 o Reflects on the prices of goods and services Chapter 11 04 06 2011 Chapter 11 Measuring the cost of living Consumer Price Index CPI measure of the overall cost of the goods and services bought by a typical consumer CPI price of basket of goods and services in current year price of basket in base year X 100 o CPI goal to measure changes in the cost of living Inflation Rate the percentage change in the price index from the preceding period IR in year 2 CPI year 1 CPI year 2 CPI year 1 X100 Producer Price index a measure of the cost of a basket of goods and services bought by firms The GDP deflator measures the prices of all goods and services produced domestically the CPI measures the prices of all goods and services bought by consumers Imported goods show up in CPI but not GDP Amount in today s dollars Amount in year T dollars X Price level today Price level in year T CHAPTER 15 Chapter 15 Unemployment 04 06 2011 Natural rate of unemployment the amount of unemployment that the economy normally experiences Cyclical unemployment the year to year fluctuations in unemployment around its natural rate How unemployment is measured survey by the BLS 3 categories employed unemployed not in the labor force Labor force sum of employed unemployed workers Unemployment rate unemployed labor force X100 Labor force participation rate measures the percentage of the total adult population of the unites states that is in the labor foce Labor force participation rate labor force adult pop X 100 Most spells of unemployment are short term however most observable unemployment is long term suit them Frictional unemployment it takes time for people to find the jobs that best Public policy towards unemployment Unemployment insurance gov program that partially protects workers incomes when they become unemployed o Reduces hardships or unemployment but overall it increases Minimum wage laws raises Standard of living but raises unemployment unemployment Union a worker association that bargains with employers over wages benefits working conditions of employment Collective bargaining process by which unions and firms agree on the terms Efficiency wages above equilibrium wages paid by firms to increase worker productivity Structural Unemployment qlabor exceeds the quantity demanded Productivity the quantity of goods and services produced from each unity of 04 06 2011 Chapter 12 Chapter 12 Production and Growth labor input An economy s income is its output PRODUCTION FACTORS capital the stock of equipment and structures that are used to produce goods and services human capital the knowledge and skills that workers acquire through education training and experience technological knowledge society s understanding of the best way to produce goods and services Natural Resources Diminishing returns the property whereby the benefit from an extra unit of input declines as the quantity of the input increases Catch up effect countries that start off poor tend to grow more rapidly then countries that start off rich Growth Factors Living Education investment in human capital increases Standard of Health and Nutrition investment in human capital healthier workers are more productive Property Rights and Political Stability Free Trade free trade instead of isolationist policies are more effective in achieving a higher standard of living Research and Development better technology leads to more growth Population Growth more workers to produce goods and services Investment abroad Companies invest in foreign countries the foreign countries grow and the companies profit off the growth as well Foreign direct investment Foreign portfolio investment Chapter 13 Chapter 13 Saving investment and the financial system Financial system the group of institutions in
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