chapter 1 Flashcards
what is the difference between microeconomics and macroeconomics?
micro zooms into the specific choices made by consumers and producers. macro looks at the world through a larger lens, the big picture of how consumers and firms operate.
how are consumption and production interconnected?
the supply and demand curve
what tools are used to study microeconomics
emipiral discipline: data analysis and experiments to explore economic phenomena as opposed to abstract theorising.
how much percentage of electricity did bitcoin mining use in 2018
0.3% almost as much as entire countries (austria, chile)
name the four key assumptions of S&D model
- We focus on S&D in a single market
- All good sold in market are identical
- All good sold for the same price, everyone has identical info.
- There are many producers/consumers within the market.
name 5 factors that influence demand
- price
- number of consumers
- consumer income or wealth
- consumer tastes
- prices of other goods
demand curve
shows the relationship between quantity of demand (x) and price (y)
mathematical representation of the demand curve
example: Q = 1000-200P
QUANTITY = MAXIMUM QUANTITY - INCREMENT (PRICE)
What is a demand choke
The price at which quantity demanded is zero; the vertical intercept of the inverse demand curve.
derived demand
A demand for one product (such as labor) that arises from the demand for another product (a firm’s output).
inverse demand curve
price as a function of quantity demanded
demand curve shifts
tomato example:
if tomatoes are found to contain salmonella the demand curve shifts left (inwards)
if tomatoes are found to fight cancer demand curve shifts right (outwards)
changes in quantity demanded
a movement along the demand curve
factors influencing supply
- price
- suppliers cost of production
- number of sellers
- outside options
graphical representation of supply curve
holding all else equal producers are willing to supply more of good as price rises.
supply choke price
the vertical intercept of the supply culve
inverse supply curve
write the supply formula but as a function of price not quantity eg.
Q=4P-4
becomes
P=0.25P+1
Changes in quantity supplied
A movement along the supply curve that occurs as a result of a change in the good’s price. (p. 19)
change in supply
A shift of the entire supply curve caused by a change in a determinant of supply other than the good’s own price.
market equilibrium
The point where the demand and supply curves cross, if you follow this intersection to the respective x and y axis cross points you will find the ME price and quantity
Mathematically deriving price and quantity demanded at market equilibrium
set the demand and supply equations as equal to each other.
find the price by setting the inverse demand and supply as equal
