Unit 1

Movements of ppg

Inside of curve: any point inside (unemployment, underemployment, famine, war, recession, depression)

Along the curve: on the curve

Shifts of the curve: can shift inside or outside the curve

Opportunity cost: next best alternative that you must give up in order to get something, form of trade-off

Law of increasing opportunity costs: as you produce more of one good (the far gone production of another good), will increase

Concave (bowed out) vs Constant (same, straight line) ppg

Productive efficiency: (Products are being produced in the least costly way, any point on the ppg) vs Allocative efficiency: (Products being produced are ones that are most desired by society)

Elasticity of Demand- Measure of how consumers react to a change in price

Inelastic Demand (demand for a good will not change, or will change very little regardless of price. Ex: soap, water, gas, insulin), Elastic Demand (demand will change greatly given a small change in price. Can have other substitutes. Ex: Coca-Cola, fur coat, steak), Unitary Elastic (no perfect society, equal to one)

Revenue (Price x Quantity) and Cost -

Fixed Cost: cost that does not change no matter how much of a good is produced (ex: mortgage, insurance, salary)

Variable Cost: cost that rises and falls depending upon how much is being produced (ex: utility, water or electricity, bills)

Marginal Cost: cost of producing one more unit of a good

Business Cycles: Fluctuations in economic activities that an economy experiences over a period of time

Expansion: Periods of economic upturn when output and employment are rising

Peak: Highest point, period in which business has reached a temporary maximum, at near or full employment

Contraction aka Recession: Period of decline in total output, income and employment

Trough: Lowest point, economy goes from recession to depression