Economics Study of choices given scarcity Not an infinite supply Scarcity lack of enough resources to satisfy all desired uses of those resources Econ Notes Types of goods 1 Final Goods used today for consumption for immediate satisfaction 2 Intermediate Goods factors of production resources used to produce final goods Consumption in the future for satisfaction Factors of Production resource inputs used to produce goods and services such as land labor capital and entrepreneurship the inputs needed to create the output Ex Rubber fabric workers and Nike all create the Nike Shoes everyone seems to have Final Goods are scarce no unlimited supply bc we don t have unlimited supply of intermediate Factors of Production Land Natural Resources Labor Human Capital fry boy bus boy farmers maids etc People who do the work 1 2 3 Capital Physical Capital Machines Tools Factories etc 4 Entrepreneur risk taker What to Produce How to Produce and For Whom to produce 3 Questions What is produced In terms of our limited resources who makes the decision of what is produced For whom is the production for Who gets the good and services How is it produce What resources you used to make the goods Who makes the decision Efficiency when getting more of one good lead to getting less of the other Efficiency least costly Vs equity fair Ppf model table or curve that represents different combinations of output GDP that can be produced in an economy in a given period of time Assume fixed amt of resources efficient use of resources and tech fixed tech gets us to curve 1 The price of the good doesn t change but the price does and your attitude changes toward it Cause Effect relationship Goal Maximize utility Happiness Self Interest vs Selfishness Rational behavior Most likely subjective acting in your own self interest maximize your happiness Inefficiency you can produce more of one without giving up some of the other Efficiency can only produce final good by giving up some of the other Everything else is constant In general on average Opportunity cost what is given up to get something 1 Fixed resources 2 Fixed tech 3 Efficient use of both 1 2 A b c e are attainable possible E is not efficient Tractors A T1 E D unattainable C B P1 P2 Pizza Law of increasing opportunity cost some resources are more efficient at producing some goods but not others Tractors used to produce final goods and services that will be consumed in the future Pizza final goods and services that we consume today Future consumption y axis Current consumption x axis As you move along the curb you either lose future consumption or you gain some Ex from point c if you go to point b you are losing tractors but gaining pizza but if your going from point b to point c you are losing pizza but gaining tractors This implies that as you leave from point c to point b you are gaining more of current satisfaction consumption And vice versa you are gaining more of future satisfaction consumption Remember that with the curb you have 1 Fixed number of resources 2 Fixed tech 3 Efficient use of 1 and 2 But when the curb is shifted to the right the curb is increasing its resources shift outward changing its technology improves productivity Tractors T1 A B Pizza From A B you produce more products that help pizza but really will make about the same amount of tractors Firms goal maximize PROFITS We want to make money that actually can end up in our pockets Maximize the difference between revenue and quantity s quantity d Profit Revenue Costs Price of good x Quantity of amount Q Qs Qd Q amount produced and sold Firm s choice variables Can it Choose P Competitive market is used to develop supply and demand model Characteristics 1 Many buyers and sellers each one is small relative to the entire market total market output is 1 million units produced and then consumed Producers produce a little bit of the market not all 1 million units No single seller has control over the price of how much the product is worth because each of the producers produces the same thing