Chapter One – The Foundation of Economics
1a. + 2b. Economics is the study of how scarce resources are or should be used. Scarce meaning that the resource is desired however limited in quantity. The allocation of an scarce resource can be crucial for an nations success in their economy. For example, steel can be an scarce resource due to its various methods of usage, and also for its limited supply. Economics is used to determine what form of allocation would be the most effective when using the scarce resource. One of the most common method is to use an PPC curve.
This graph determines the PPC curve for steel spoons and guns in two different countries. Nation A (Example: Japan) produces a much more larger amount of steel spoons, instead of making guns. Nation B (Example: North Korea) produces a much more larger amount of guns, instead of making guns. Opportunity costs always occur while making choices. Opportunity cost is the value of the best alternative forgone by making an economic decision. In this example Nation A’s opportunity cost was the value of producing guns. Nation B’s opportunity cost was the value of steel spoons. Although each individual nation can distribute in any sort of way, however opportunity costs will always occur aslong as steel remains as an scarce resource.
Chapter Two – Competitive Markets: Demands and Supply
Movement of an demand curve: is when the point on a demand curve moves its position along the curve. This happens when an price of goods/service changes, therefor the demand is influenced.
Shift in the demand curve: is when there is change in the non-price determinants of demand. In this case the curve it self is shifted parallel to the x axis either to the left or right depending on its fluctuation.
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