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ECON 1 | Elementary Economics |
Course: Mo, Tu, We, Th, Fr; from 10am - 10:50am
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All individuals face scarcity in one form or another. Scarcity forces people to make choice, there is also an opportunity*33 cost of not doing one thing because another thing has been chosen.
An opportunity costs*33 occurs*29 every time there is a choice. For example, the opportunity costs of going to an 8am class rather than sleep in is the loss of sleep from getting up to early.
If there are more than 2 options, then the opportunity costs*33 is the loss from the next best option.
People benefit from economic interactions-trading goods and services-with other people. Gains*31 from trade occur because goods and services can be allocated in ways that are more satisfactory*32to people.
Gains from trade also occur*29 because trade permits specialization throigh the division of labor*30. People should specialized in the production of goods they have a comparative advantage in.
The Production possibilities Curve*34:
Lets suppose that in summer the time of a student can be divided into two broad categories. Studing the ECON 1 class and running a webbusiness. If he is doing all the time studing for the ECON 1 he will get maybe an 95 % of the grades. If he spend all the 40 avalable hours running his webbusiness he will get 800 $ (view econ1-bsp1-exel.exl).
As you can see, each extra hour spend for the webbusiness requires a loss of more and more pts on your grades. What we have just described is called increasing opportunity costs*33.
more about PPC*34:
| constante Opp Costs*33 | decreasing Opp Costs*33 |
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| increasing Opp Costs*33 | realistic Opp Costs*33 |
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one more example (view econ1-bsp3-exel.exl):
The choice between computer and movies is symbolic of one of the most fuundamental choices individuals in any societc musst face: how much to invest in order to produce more or better goods in the future versus how much to consume in the present.
Economic Growth: Shifts in the Production Possibilities Curve
The production possibilities curve is not immovable. It can shift out or in. Maybe an technology innovation can shift out the curve of the computer & movies example.
As the production possibilities curve shifhts out, impossibilities are converted into possibilities (for example: 300 Movies and 22000 Computers).
Scarcity, Choice, and Economy Growth
However, the conversion of impossibilities into possibilities is also an economic problem of choice and scarcity; if we do not invest in the future now-in machines, in education, in children, in technology-rather than consume everything, it is unlikely that economic growth will continue.
Three Questions
Example 1 (view econ1-bsp4-exel.exl)
This example shows how much coffee an idividual would consume, depending on the price.
Example 2 (view econ1-bsp5-exel.exl)
This Example shows how much coffee would the hole stanford campus consume, depending on the price.
Demand is a relationship between the price of a good and the quantity people will buy at each price, all other things equal. The demand curve slops down. The demanded are negatively related.
When the price of good changes, the quantity demanded changes and we have a movement along the demand curve.
When something other than the price changes and affects demand, there is a shift in the demand curve or simply, a change in demand.
The price elasticity of demand is a measure of how much the quantity demanded canges when the price change.
An elasticy of demand (supply) is the % change in quantity demanded
Question 1
Lyon Forrest is a high school senior, and is currently the highest-ranking womenÕs amateur tennis player in the United States. SheÕs faced with the decision of whether to attend Stanford or join the professional tennis tour. Her coach has told her that, on average, a professional tennis career lasts for only 4 years, and she could expect to make $250,000 a year. If she attends Stanford, Lyon will pay $20,000 in tuition. She estimates that her living expenses will be $12,000 per year over the next four years, whether she attends Stanford or joins the tennis tour.
a) Based on the information you have, what are LyonÕs opportunity costs of attending Stanford?
b) Suppose LyonÕs high school guidance counselor tells her that a Stanford degree will bring her $1,000,000 in additional income. Should she attend Stanford or turn pro? If you have to make any additional assumptions, explain what they are.
Question 2
Describe what effect the given shock will have on the following markets. For each part, draw a diagram showing graphically what happens to price and quantity, and give a verbal explanation:
a) The market for Nike shoes: Third world countries decide to double their minimum wages, therefore increasing the wages of all sweatshop workers.
b) The market for ground beef: Oprah Winfrey announces, on air, that fears of mad cow disease will keep her from eating another hamburger.
c) The market for electricity: The federal government relaxes pollution regulations on electric utilities.
d) The market for apples: A frost wipes out this yearÕs orange crop.
Question 3
Suppose the US government enacts a large cut in the federal gasoline tax. Analyze the likely effects of the tax cut on the market for gasoline in the United States, using a diagram and a verbal explanation. Show and explain how your answers will be different depending on whether the demand for gasoline is very elastic or whether itÕs very inelastic.
Question 4
Barbara and Jenna are twin sisters. Very often, they buy their blue jeans from the Gap. Their willingness to pay for Gap jeans is given by the following chart:
a) Calculate the marginal benefit of Gap jeans for each sister, and draw Barbara and JennaÕs individual demand curves.
b) Suppose the price of Gap jeans is $30 a pair. How many pairs will each sister buy? Now suppose that the Gap changes its pricing policy such that jeans are buy-one-get-one-free, but increases the price to $60 per jean. How many will Barbara and Jenna buy? If they acquire different amounts under this pricing policy than they do at $30 a pair, explain why. If they donÕt, also explain why.
c) Draw the market demand curve for Gap jeans in the sistersÕ household (assume that theyÕre the only two jeans-wearers in the household). Find the consumer surplus for the market if Gap jeans are $24 a pair.
Question 5
Trudy is a profit-maximizing producer of pizzas. Her production costs are summarized by the following table:
a) Sketch TrudyÕs supply curve. Show any calculations you have to make along the way.
b) If the market price of a pizza is currently $7, how many pizzas will Trudy produce? What are her profits? What is her producer surplus? Sketch a diagram which shows your answers graphically, in addition to giving a numerical answer.
Question 6
A firm exhibits the following production function:
Suppose labor costs $10/hour. The price prevailing in the market is $40 per unit. Fixed costs are $80.
a) What will the profit-maximizing output for the firm be? How much profit does the firm make? Calculate the producer surplus.
b) Suppose fixed costs are $100. What is the profit maximizing output for the firm? How much profit does the firm make? How much is producer surplus? Where is there increasing marginal product of labor? Where is there decreasing marginal product of labor?
| Autor: | Hy, my name is Patrick I'm from Austria. I start this projeckt to get a good summery for learning ECON 1. |
| mailto: | patrickoehlinger@gmx.net |