What is economics? Many will tell you that economics is about making choices in conditions of scarcity; others will tell you that it is about making decisions on the margins, and a few will tell you that those two answers are the same.
The demand curve can show a single individual's demand for a good or it can show many individuals’ aggregate demand for a good. The supply curve shows a positive relationship between the quantity of a good sold and the price at which it is sold.
Market Equilibrium occurs when the market price reaches a level at which quantity supplied equals quantity demanded.
Case Study - Green Space and Equilibrium
When prices change, the quantity that consumers buy will also change. When prices increase, consumers purchase less; the quantity demanded decreases. The question is, by how much?
Price Elasticity of Demand
Income Elasticity of Demand
Cross-Price Elasticity of Demand
When consumers consume various quantities of a particular good, they realize different levels of utility from that consumption.
Diminishing Marginal Utility
Case Study - Diminishing Marginal Utility
One of the goals of economics is to understand how people make decisions about what to buy and consume. To do this, economists have developed a model of consumer choice called the utility maximization framework.
Producer Surplus Consumer Surplus
One of the important subjects in economics is international trade. In today's world economy, it is very important to understand why international trade happens. About two thirds of all international trade happens because of comparative advantage.
Comparative Advantage and International Trade
Production Possibility Frontier
How do firms and businesses decide how to price things? How do these prices affect demand?
Every business, large or small, needs to understand its cost of production to operate efficiently and effectively maximize profit.
Costs of Production
Marginal Cost and Average Fixed Cost
Declining Average Cost
Why does a firm hire a worker? What questions does a firm have to ask to decide if they should hire a worker? Why would a single employer pay two different people different wages to do what seems like the same job, or to perform the same task?
The Firm's Hiring Decision
Why Wages Vary
A negative externality is a cost that an economic transaction imposes upon an uninvolved third party. Consumption causes some negative externalities. Production causes others. Taxation is one solution. Taxes also affect prices.
In this unit we review the four traditional market structures that we use in industrial organization or industry analysis.
The characteristics of perfect competition: There are many buyers and sellers; Goods are homogeneous; Firms are price takers; Firms freely enter and exit the market.
Perfect Competition - Introduction
Perfect Competition - Profit Scenario
Perfect Competition - Minimizing Losses
Perfect Competition - Shutdown Scenario
Perfect Competition - Supply and Demand
A monopoly, by definition, is a market structure with only one seller and no close substitutes.
If you consider the firms where you shop most frequently and the firms that advertise the most, many of them are in a market that we describe as monopolistic competition.
Monopolistic Competition - Introduction
Monopolistic Competition - Equilibrium
The first assumption that we make about an oligopoly is that there are few firms. This contrasts with perfect competition where there are many firms, and with monopoly, where there is just a single firm.
Oligopoly - Introduction
Case Study - Airlines vs. OPEC
Macroeconomics is the study of the behavior of the aggregate economy, exploring the economy's output, national income, unemployment, inflation, price levels and growth. Microeconomics, on the other hand, studies how households and firms make decisions and how they interact in markets.
The U.S. GDP is a very large number. In 2011, for example, the U.S. GDP figure was more than $14 dollars. In 2013, U.S. GDP was estimated by the Department of Commerce to be $16.8 trillion.
GDP vs. GNP
Capital Stock and Flow Variables
Saving and Investment
Nominal vs. Real Quantities
Population and real GDP affect the demand for labor and employment. In our society, people are very busy with jobs, household work, schools and many other activities.
GDP Deflator vs. CPI
Population: Employment and Unemployment
Unemployment and the Recessionary Gap
What happens when there is inflation and the government does not intervene in the markets?
Inflationary Gap Without Government Intervention
Interest Rates vs. Bond Prices
Most governments' annual budgets feature fiscal deficits. Governments bring in revenues in the form of taxes, and they have expenditures.
Solutions to the Population Pyramid
Fiscal Policy - Taxation
Fiscal Deficit vs Debt
Just as there is a supply curve for goods or services, there is a supply curve for money. The supply of money is determined by the Central Bank. The Central Bank sets goals for the amount of money it wants in circulation at any given time.
Money Supply and the Money Multiplier
Countries will trade with each other because trade is driven by comparative advantage and not by absolute advantage.
Comparative Advantage and International Trade
Benefits of Trade
Currency Exchange Rates
In this chapter, you will learn the basic math skills required for the study of economics.
How to Plot a Line
Present and Future Values of Money