1. Introduction to Economics, Basic Economic Concepts and Theories
2. The Elements of Supply and Demand
3. Theory of Aggregate Supply and Demand
Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts
Home Posts filed under >Economics
Introduction to Economics - Basic Economic Concepts and Theories
Three fundamental problems are to be solved by every economy.
1. what kinds and quantities shall be produced of all possible goods and services?
2. How shall resources be used in producing these goods?
3. And for whom shall the goods be produced? Or what shall be the distribution of consumption among different individuals in the economy?
Society solve these problems in different ways - by custom, by commnad and control (central planning) and in mixed economies and free market economies by a system of prices and markets.
Prof Kenneth Train
UC Berkeley
___________
___________
1. what kinds and quantities shall be produced of all possible goods and services?
2. How shall resources be used in producing these goods?
3. And for whom shall the goods be produced? Or what shall be the distribution of consumption among different individuals in the economy?
Society solve these problems in different ways - by custom, by commnad and control (central planning) and in mixed economies and free market economies by a system of prices and markets.
Video Lecture - Economics
Prof Kenneth Train
UC Berkeley
___________
___________
Labels:
Economics
Elements of Supply and Demand - Review Notes
Demand Schedule
A demand schedule represents the relation between the quantity of a good or service that people in an economic system want to buy and the price of that good or service.
Law of downward-sloping demand.
Almost all commodities obey the law of downward-sloping demand. The law says quantity demanded increases as price of the good falls or the quantity demanded decreases as the price increases.
Supply schedue
Gives the relationship between the quantity that producers in an economic system are willing to sell at various prices.
Equilibrium in the market for a good
The equilibrium of supply and demand occur at a price where forces of supply and demand are in balance.
The elasticity of demand of a specific good is defined as:
Percentage increase in quantity demanded of the product/Percent decrease in price of the product
Price elastic demand
If a one percent drop in prices leads to more than one percent increase in quantity demanded, we say it is price elastic demand.
If the percentage drop in price and percentage increase in quantity demanded are same, it said to be unit elastic demand.
If percentage drop in price is higher than the percentage change in quantity demanded, we say it is price inelastic demand.
The concepts are useful because measurements can be made and elasticities can be calculated. The results are used for decision making regarding setting supply schedules.
Similar to elasticity of demand, elasticity of supply can also be defined.
Supply elasticiy =
Percentage rise in quantity supplied/Percentage change in price
Elasticity refers to percentage change in one variable with respect to percentage change in another variable.
The supply elasticity helps the Government to decide incentives it wants to offer to industries to increase supply.
___________
___________
___________
___________
A demand schedule represents the relation between the quantity of a good or service that people in an economic system want to buy and the price of that good or service.
Law of downward-sloping demand.
Almost all commodities obey the law of downward-sloping demand. The law says quantity demanded increases as price of the good falls or the quantity demanded decreases as the price increases.
Supply schedue
Gives the relationship between the quantity that producers in an economic system are willing to sell at various prices.
Equilibrium in the market for a good
The equilibrium of supply and demand occur at a price where forces of supply and demand are in balance.
Elasticity of demand
The elasticity of demand of a specific good is defined as:
Percentage increase in quantity demanded of the product/Percent decrease in price of the product
Price elastic demand
If a one percent drop in prices leads to more than one percent increase in quantity demanded, we say it is price elastic demand.
If the percentage drop in price and percentage increase in quantity demanded are same, it said to be unit elastic demand.
If percentage drop in price is higher than the percentage change in quantity demanded, we say it is price inelastic demand.
The concepts are useful because measurements can be made and elasticities can be calculated. The results are used for decision making regarding setting supply schedules.
Elasticity of supply
Similar to elasticity of demand, elasticity of supply can also be defined.
Supply elasticiy =
Percentage rise in quantity supplied/Percentage change in price
Elasticity refers to percentage change in one variable with respect to percentage change in another variable.
The supply elasticity helps the Government to decide incentives it wants to offer to industries to increase supply.
___________
___________
___________
___________
Labels:
Economics
Theory of Aggregate Supply and Demand
Classical Theory:
Total output is insensitive to the overall price level. Prices change quickly to erase any excess supply or demand in markets.
Kenesian theory:
The economy can experience long periods of persistent unemployment. Monetary and fiscal policies help in increasing the employment.
In Kenesian theory, investment determines output or investment has a multiplier effect on output.
_________________
_________________
_________________
Total output is insensitive to the overall price level. Prices change quickly to erase any excess supply or demand in markets.
Kenesian theory:
The economy can experience long periods of persistent unemployment. Monetary and fiscal policies help in increasing the employment.
In Kenesian theory, investment determines output or investment has a multiplier effect on output.
UC Berkeley Lecture
__________________________________
_________________
_________________
Labels:
Economics
Business Cycles
Business cycles occur when economic activity speeds up for some period and slows down for some period and then once again speeds up.
A recession is a fall in aggregate output. In USA, a recession is said to occur when real GNP has declined for two successive quarters.
Okun's Law:
For every 2 percent that GNP falls relative to potential GNP, the unemployment rate rises 1 percentage point.
Characteristics of Business Cycles
At slowdowns of the economies, consumer purchases decline sharply while business inventories increase unexpectedly especially that of automobiles and other durable goods.
Business curb production, real GNP falls.
The demand for labor falls leading to layoffs and higher unemployment.
As demand falls, prices of many commodities fall sharply.
Business profits also fall sharply.
http://facstaff.uww.edu/ahmady/courses/econ402/lectures/graphs.pdf
Original Knol - 217
A recession is a fall in aggregate output. In USA, a recession is said to occur when real GNP has declined for two successive quarters.
Okun's Law:
For every 2 percent that GNP falls relative to potential GNP, the unemployment rate rises 1 percentage point.
Characteristics of Business Cycles
At slowdowns of the economies, consumer purchases decline sharply while business inventories increase unexpectedly especially that of automobiles and other durable goods.
Business curb production, real GNP falls.
The demand for labor falls leading to layoffs and higher unemployment.
As demand falls, prices of many commodities fall sharply.
Business profits also fall sharply.
http://facstaff.uww.edu/ahmady/courses/econ402/lectures/graphs.pdf
Original Knol - 217
Labels:
Economics
Macroeconomic Objectives
The major objectives with which macroeconomic management is attempted include:
1. High level and growth of output and consumption of goods and services.
2. High employment of willing persons.
3. Price level stability from period to period.
4. To have a stable foreing exchange rate
http://facstaff.uww.edu/ahmady/courses/econ202/lectures/Money_suppl.pdf
Knol 210
1. High level and growth of output and consumption of goods and services.
2. High employment of willing persons.
3. Price level stability from period to period.
4. To have a stable foreing exchange rate
http://facstaff.uww.edu/ahmady/courses/econ202/lectures/Money_suppl.pdf
Knol 210
Labels:
Economics
Subscribe to:
Posts (Atom)
