Economic
Terms
Supply/
Demand
Inflation/
GDP/the Fed/
etc.
Graphs/
Curves
Miscellany
How we decide to make the best use of �scarce resources
The cost of the next best option not chosen.
When wants are greater�than available resources.
competition and self-interest
1. Shared consumption/non-rival�2. Non-exclusion
When the price goes up, the demand goes down �(and vice-versa).
It will increase.
Demand
By making it easier/cheaper to produce, and thus more profitable.�
Tastes and preferences�Number of consumers�Consumer income�Expectations�Complements�Substitutes
Adjusted for inflation
Borrowers
GDP = consumption + investment + govt. spending +�(exports – imports)
economic growth/promote employment��controlling inflation�
Excessive monetary growth (Quantity Theory)��Demand Pull��Cost Push��Wage/Price Spiral (a kind of Cost Push)
P
Q
demand
Quantity supplied
$10
100
$5
$2
200
300
A shortage�of 200
P
Q
D1
D2
S2
S1
Equilibrium price increases,�quantity decreases
Highly elastic supply�Highly inelastic demand
What to produce�How to produce�For whom to produce
Command economies
Negative externality
�To make imports more expensive
Comparative advantage