Formulas To KnowGraphs To KnowChapter 1 NotesEconomic MethodologyChapter 3 NotesScarcity and Marginal Analysis LectureProduction Possibilities and Comparative Advantage LectureChapter 4 NotesDemand and Supply LectureTest 1 Study GuideECO 2023Dr. McCalebTable of Contents:FORMULAS TO KNOW 2 GRAPHS TO KNOW 3 CHAPTER 1 NOTES 4 ECONOMIC METHODOLOGY 10 CHAPTER 3 NOTES 13 SCARCITY AND MARGINAL ANALYSIS LECTURE 17 PRODUCTION POSSIBILITIES AND COMPARATIVE ADVANTAGE LECTURE 20 CHAPTER 4 NOTES 23 DEMAND AND SUPPLY LECTURE 28 1Formulas To Know- Slope of a Line:o M = Change in Y over change in X o M = ΔY/ΔXo M = Y2-Y1/X2-X1- Net Benefit (NB):o NB = Total Benefit – Total Cost o NB = TB - TC- The optimal amount of any activity:o Is when the Marginal Benefit is equal to the Marginal Costo When MB = MC- Marginal Benefit (MB):o MB = Change in Total Benefit/Change in Quantityo MB = TB/ΔQ o MB = (TB2-TB1)/(Q2-Q1)- Marginal Cost (MC):o MC = Change in Total Cost/ Change in Quantityo MC = ΔTC/ΔQ o MC = (TC2-TC1)/(Q2-Q1)- When to increase the amount of an activity (Production Possibilities Frontier):o If Marginal Benefit > Marginal Costo If MB > MC - When to decrease the amount of an activity (Production Possibilities Frontier):o If Marginal Cost > Marginal Benefit o If MC > MB - Labor Force (LF):o = Employed + Unemployedo = E + U- Market Equilibriumo When the quantity demanded equals the quantity supplied. o Equilibrium: QD=QS-2Graphs To Know- Productions Possibilities Curve:- Demand and Supply Curve:- Know how to find the Opportunity Cost Ratio 3Chapter 1 NotesCitation:Bade, Robin, and Michael Parkin. Foundations of Microeconomics. 6th ed. Boston: Pearson/Addison-Wesley, 2013. Print.Scarcity“The condition that arises because wants exceed the ability of resources to satisfy them” (2).Our ability to satisfy our wants and needs is limited by our resources (time, money, land, labor capital, entrepreneurship, etc.). Due to these limits, everyone (the lower, middle, and upper class) is left with unsatisfied wants. Scarcity is what causes decisions, or trade-offs. We must choice between the available alternatives. Economics“The social science that studies the choices that individuals, businesses, governments, and the entire societies make as they cope with scarcity, the incentives that influence those choices, and the arrangements that coordinate them” (2).Microeconomics“The study of the choices that individuals and businesses make and the way these choices interact and are influences by governments” (2).An example of an individuals’ choice is whether or not to buy an iPhone versus an Android. Macroeconomics“The study of the aggregate (or total) effects on the national economy and the global economy of the choices that individuals, businesses, and governments make” (3).An example of a macroeconomic choice, is whether or not to raise taxes, or how much money to borrow from other countries and what to spend that money on. Goods and Services“The objects (goods) and the actions (services) that people value and produce to satisfy human wants” (3). An example of a good is a shoe, or any other physical material that can be used or sold. There are two types of goods; intermediate goods (goods that are used to make a final product) and final goods (the final product). What?This determines the quantities, or amount, of something that is produced. How?This determines how to produce something. For instance, by hand or by machine?For Whom?This determines who gets to utilize the goods and services that are produced. Price usually allocates goods and services to individuals. Those who have a higher income can purchase more than those with a lower income. 4When Is the Pursuit of Self-Interest in the Social Interest?Everyday, every individual in the entire world makes economic decisions that result in what, how, and for whom goods and services are produced. But the question is if the goods and services produced, and the quantities in which they are produced the right ones? Do the scarce resources get used in the best possible way? Do the goods and services that we produce go to the people who benefit most from them?Self-Interest “The choices that are best for the individual who makes them” (4).You make decisions that are in your best self-interest, or choices that you think are best for you at that time. When you act on your economic decisions, you come into contact with many other producers and consumers. These people have all made their own decisions of what to produce and how to produce it, or what to buy and how to buyit. Making decisions that are in your best interest (self-interest) can also benefit/hurt society as a whole (social interest). Some examples include globalization, the information age, climate change, and the social security time bomb. Social Interest“The choices that are best for the society as a whole” (4). This has two dimensions: efficiency and equity. Globalization“The expansion of international trade and the production of components and services by firms in other countries” (5).Globalization is bringing rapid income growth, but is at the same time leaving some people behind. Example: when Nike produces more shoes, people in Malaysia have more work to do, but manufacturing jobs in the United States are being lost due to this form of outsourcing. The Information AgeA relatively new revolution that started 25 years ago with the invention of the microprocessor, or computer chip, launched the Information Age. This lead to faster, and cheaper computing and has widely spread to many industries all around the world. It has automated task that once required human decision and action. Example: Bill Gates and Gordon Moore were in pursuit of the big pay-offs, but through the development of their products, many people were better off (aka their self-interest led to social interest). However, the digital divide wascreated in which those with low incomes could not use the technology, even though they might have needed to.Climate ChangeIt is believed that the current global warming conditions have partially been caused by human economic activity (self-interested choices) and if left unchecked, could lead to huge future economic costs. A Social Security Time Bomb5Deficits and debts that are created by the
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