Economic Test Prep

First week

 

• What we choose to do for ourselves VS what we leave for others to do.

 

• Choose to do the most profitable activities.
  • Leave other activities to others
• Economic
  • How we make decision based on our limited resource
• (Seller) Law of supply( our willing to sell)
  • The price increase, supplier will sell more (positive relationship)
• (Buyer) Law of demand (our willing to buy)
  • As price goes up people will demand less as price goes down people will demand more. (Negative relationship)
• Equilibrium point
  • At this point, the amount that seller wants to sell equal to the amount that buyer want to buy
• What makes the demand curve shift outwards?
  • Increase in population
  • Changes in income
  • Seasonal effects
  • Change taste and preferences New information
  • Expectation (price is going up later so we have to demand now)
  • Price of related foods
    • Sub
    • Com
    • Input (supply)

 

Second Week

 

• The demand always move first

 

• The demand curve shifts outward:
  • At every price, people buy more than before  

 

• Substitute: the product that can use in place of each other
  • When the price of the Good A goes up the demand good B will go up.
• Substitute is the positive relationship between the price of one good and the demand for another good.  

 

• Complements: goods that are usually bought together (demand)
  • Always negative relationship
  • The price of one good go up and the demand for another good go down
    • EX: Car and Gasoline when the price of car go up people will demand less gasoline
• Thing can move supply curve
  • Input (parts of things that combine and make bigger thing like: watch)
    • If the price of input goes down (supply move to the right)
    • If the price of input go up (supply move to the left)
  • Number of Sellers
    • Number of sellers go up (supply move right)
    • Number of sellers go down (supply move left)
  • Technology
    • Technology go up (supply move right)
    • Technology goes down (supply move left)
  • Tax
    • Reduces taxes (supply move to the right)
    • Increase of taxes (supply move to the left)
  • Expectations
    • Seller (ex: grape price go up) (supply move left)
    • Seller (ex: grape price go down) (supply move right)
  • Change in price of another good that the seller could produce
    • Price of other good go up (supply will move to the left)

 

Third week

 

• Price ceiling is equilibrium point
• Price floor above equilibrium point

 

Fourth Week

 

• In order
  • Curve moves (supply or demand)
  • Price changes

 

• • Fifth week
    • Review
      • If the government places a 15% tax on cigarette makers, then the supply curve for cigarettes will move to left and the price will increase.
      • If the price of Anchor beer decreases, Then the demand curve for Angkor beer will shift left and the quantity of Angkor beer purchased will decrease.
      • If gold buyers expected gold to fall 10% than the buyer of gold will make the demand curve will shift left and the price of gold will decrease and the quantity of gold purchased decrease.
      • If the price of widgets expected to increase 10% then the sellers of widgets will make the supply curve shift left and the price widgets will increase and the quantity of widgets purchased decrease.
      • If the price of milk doubles, then the demand curve for cereal will shift left and the quantity of cereal sold will decrease and the price will decrease.
      • When the price of sugar decrease then the Supply curve for Coca-Cola will shift to the right, the price of coca will decrease and the quantity of Coca-Cola will increase.
      • If there are a national disaster and the technology needed to make widgets is wiped out, Then the supply curve for widgets will shift to left and the quantity sold will decrease.
      • If the price of rechargeable batteries increase, Then the demand, Supply curve for cell phones will move Left, Left and the price will decrease, increase and the quantity sold decrease, decrease.

 

• Demand slope downward supply slope upward.

• If both D and S shift to the right it means both of it increases and if D and S shift to the left it means both of it decrease