Bernard 's AP Macroeconomics Blog

Price Ceiling - a legal maximum price meant to help buyers . It keeps the price for getting to high. 4 Consequence when Price Ceiling set too low   lower prices for some consumer  shortages  long lines for buyers  illegals sales above the equilibrium price  Price floor - the legal minimum price to help seller ;it keeps the product price from falling . 4 Consequence when Price Floor set too high   higher product prices help few sellers surplus  higher taxes waste

Supply   - the quantity that suppliers are willing and able to produce at various prices . The law of  Supply   - there is a direct relationship between price and quantity supply . what causes a change in quantity supplied  ? △  in price Determinants  △ in # of sellers  △ in the cost of production resources ( current price ) △ in  weather △ in technology △ in taxes or subsidies △ in exceptions ( future) Increase in supply = curve shift right ; price increase quantity increase  Decrease in supply = curve shift left ; price decrease quantity decrease 

Demand   - the quantity that people are willing and able to buy at various prices . The law of  Demand   - there is a inverse relationship between price and quantity demanded . what causes a change in quantity demanded ? △  in price Determinants  △ in # of buyers ( population ) △ in buyer's taste ( achievement / preferences ) △ in income - inferior goods , normal goods △ in the price of related goods - substitute goods , complimentary goods  △ in exceptions ( future )   inferior goods - goods that buyers buy less of when their income rises   normal goods - goods that buyer buy more of when their income rises   substitute goods - goods that serve roughly the same purposes ( coke, Pepsi )   complementary goods - goods that other consume together ( cereal & milk ) Increase in demand = curve shift right ; price increase quantity decrease Decrease in demand = curve shift left ; price decrease quantity increase

Fixed costs - a cost that does not change no matter how much is produce ( ex. mortgage ) Variable costs - a cost that raises or falls demanding upon how much is produce ( ex. Electricity bills) Total costs : Fixed cost + Variable costs = Total cost Marginal revenue - the additional income from selling one more unit of a good Marginal costs - the cost of producing one more unit of good Total Revenue = Price x Quantity (Terms for cost of production) Total fixed cost - TFC Total variable cost - TVC Total cost - TC Average Fixed cost - AFC Average Variable cost - AVC Average Total cost - ATC Marginal cost - MC (Calcualtions for cost of production ) TFC+TVC=TC AFC+AVC=ATC TFC/Q=AFC TVC/Q=AVC TC/Q=ATC AFCXQ=TFC  AVCXQ=TVC

Price Elasticity of Demand : a measure how consumer react to a change in price . Elastic demand - demand that is very sensitive to a price There are substitutes ; they are not a necessity  E > 1  ex : soda , steak , fur coat  Inelastic demand - demand that is not very sensitive to a change in price ( there are few to no substitutes; it is a necessity) E < 1  ex .insulin , milk , gas  Unitary elastic -  E = 1  PED  ( Calculations ) Step 1 : Quantity            ( new- old / old ) Step 2 : Price            (new- old / old ) Step 3: PED = %  Δ in quantity/% Δ   in price 

Trade-offs : alternative chooses that people face while making an economical decision Opportunity Cost : the most desirable alternative giving b making a decision. PPG- Production Possibilities Graph : show  alternative ways to use resources PPC - Curve PPF- frontier    Inside of the curve - under-utilization , unemployment , recession, underemployment    On the curve - Point A- E ; efficient & Attainable Outside of the curve - Point G Economic growth technology                3 type of movement of the PPC    Inside the PPC      Along the PPC Shifts of the PPC Key Assumptions        2 goods are produce  Fixed resources Fixed technology  Full employment  Full employment        4 to 5% unemployment       90% factory capacity         5. No international trades 

                                                  Macroeconomics vs Microeconomics  Macroeconomics - the study of the economy as a whole. Microeconomics - the study of individual parts of the economy.                                                 Positive vs Normality economics  Positive -  claims that attempt to describe the world as is ( ex. minimum wages law causes unemployment) Normality - claims that attempt to prescribe how the world should be (ex . the government should raise the minimum wage)                                                               Wants vs Needs Wants - desires of citizens  Needs - basic requirement for survivor                                                                                                        Scarcity vs Shortage   Scarcity - the most fundamental economy problems that all society face. ( how to satisfy limited wants with limited resources ) Shortage - are temporary ; when quantity demand is greater than quanti