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DEMAND Demand: is the quantities that people are willing and able to buy at various prices. The Law of Demand: there is an inverse relationship between price and quantity demand (P^ Qv     or    Pv Q^) Change in price causes a change in quantity demand Determinates causes a change in demand. The are five specific ones:   Change in buyers taste. (ex. advertisement) Change in the number of buyers. (ex. population) Change in income: normal goods and inferior goods. Normal goods- goods that buyers buy more of when there income issue rise. Inferior goods- goods that buyers buy less of when there income rise.  Change in the price of related goods: substitute good and complementary goods.   Substitute good- goods that serve roughly the same purpose to buyers. (ex. coca-cola and pepsi.) Complementary goods- goods that are often consumed together. (ex. hamburger and fries) Change in expectations- meaning change in the futu...

Positive Economics vs. Normative Economics Positive Economics: Claims that attempt to describe the world as it is.  Descriptive in nature. Fact based. Examples include: minimum wage laws causing unemployment. Normative Economics- Claims that attempt to prescribe how the world should be.  Opinion based. Examples include: government should raise minimum wage  Wants: Desire of citizens Needs: basic requirements for survival Shortage- temporary, quantity demand is greater than quality supplied.  Surplus- Quantity supply is greater than quantity demanded.  P^ QD> QS scarcity Pv  QS>QD shortage surplus Factors of production (4)   Land: Natural resources Labor: Work exerted Capital (2):  Human capital- knowledge/skills that a worker gains through education and experience. Physical Capital- human made objects used to create other objects. An example would be machinery, tools, etc Entrepreneurship:innovat...

Vocabulary: Scarcity- The fundamental economic problem that all societies faces. Refers to the limited amount of resources available.  Economics- is the study of how society's manages its scare resource.  1st Pillar of Economics- "Nothing in our material world can come from no where or go no where, nor can't be free. Everything in our economic lives has a source, destination, and cost must be paid.  Five Key Economic Assumptions-    A societies wants are unlimited but ALL resources are limited- scarcity.   Due to scarcity, choices must be made. Every choice has a cost. - Trade off  Everyone's goal is to make choices that maximize there satisfaction. Everyone acts in there own "self-interest".  Everyone makes decisions by comparing the marginal costs and marginal benefits of every choice.  Real life situations can be explained and analyzed through simplified models and graphs. Marginal cost- the cost of a one unit increas...