National economic:

Introduction to economics:

- PPF: most often convex to the origin due to the law of diminishing returns. The more of good B is sacrificed for the increase in the production of good A, the extra output for A becomes smaller,
- If the returns are constant the PPF line is straight.


Demand:

- The demand curve shows the quantity the consumers are willing and able to pay far a certain good.
- Change in price leads to movement along the demand curve
- Shift in demand my be caused
o Change in price of substitute
o Change in price of compliment good
o Advertisement
o Change in lifestyle
o Population change
o More credit is available
- It is downward sloping because:
o The diminishing utility, the more we have the products the less useful they are
- It is upward sloping
o Giffen good
o ‘ostentious goods’
- Utility = Satisfaction
- MU = marginal utility – extra satisfaction of consuming another good
- Law of diminishing marginal utility: states that successive units of consumption will eventually lead to a fall in their marginal utility
- Price elasticity and a straight line demand curve
o At the left the demand is price elastic – price ish big therefore small % change will influence the demand curve
o At the right demand is price inelastic relatively big change change in price will lead to a relatively small change in quantity demanded

Supply

- Joint supply beef and cow skin
- The price elasticity of supply:
o %change in quantity supplied/%change in price
o
o
o