Instructor: Basil Al Hashimi
Please be sure to visit each of the following links:
Instructions for Module # 1
- Required Reading as follows: Review Chapters 1-5 in Macroeconomics.
- Written Report Assignment:
Prepare a 2-4 page report addressing one of the topics
below. The paper should be based upon reading, research, or experience, such as a personal job experience or case study. Concepts from the text should be integrated when applicable. Identify the microeconomics concept(s) or
principle(s) involved, relate the report to a specific business or industry, and provide conclusions, recommendations, or lessons learned as a result of yourresearch.
Price Elasticity:
Evaluate the price elasticity of demand for a
good or service your company
provides to its customers. determine if it tends to be elastic or inelastic, and the reason why. Compute elasticity using the measurement formula in Chapter 5 in the text.
or
Production Functions
Discuss
the economics of a specific firm relative to how its current size and level of production are, or are not, optimizing its potential. Look at the production function, marginal and average product, diminishing returns, returns to scale, and the
effects of technology. Use these clues to make an estimate as to how effectively the firm is operating.
Important Points of Chapters 1-5 (handout for these chapters):
Written by: Basil Al-Hashimi
Course: Microeconomics 112
The following notes have been created in order to assist you in your
understanding of the text as well as to help you prepare for your
examination.
- The single word that best describes the fundamental problem of economics
is scarcity.
- Economic policies can be designed to fight inflation , unemployment
, and trade imbalance.
- Economic goods are goods that are in scarce or limited supply.
- Economic analysis plays an integral role in helping us to better
understand our society.
- A free good differs from an economic good in that it is not scarce
.
- "Distribution " in economics refers to "for whom".
- Absolute prices are prices in terms of some monetary unit.
- Relative prices are the prices of goods and resources in terms of
each other.
- Production is a creation of value or additional value.
- Opportunity cost is the value of the sacrificed alternative.
- A mixed economy is an economy that is one in which public and private
sectors play important roles.
- Economic efficiency is the adoption of the technology that minimizes
the total cost.
- Allocative efficiency is the production of goods in that combination
that maximizes the total satisfaction of consumers.
- Capital is best defined as produced goods used for further production.
- Normative economics considers what ought to be - value judgments,
or goals, of public policy.
- Positive economics is the analysis of facts and behavior in an economy,
or the way things are.
- Division of labor is a method of organizing production whereby each
worker specializes in part of the production process.
- The law of comparative advantage says that a nation should specialize
in producing and exporting those commodities which it can produce at
relatively lower cost, and that it should import those goods for which
it is a relatively high cost producer.
- The law of diminishing returns states that the additional output
will decline as more of one input is added.
- Economic growth is an increase in the total output of a nation over
time . Economic growth is usually measured as the annual rate of increase
in a nation's real GDP.
- Production Possibility Frontier (PPF) is a graph showing the menu
of goods that can be produced by an economy.
- Being on the PPF between guns and butter means that more guns can
be produced only by doing without some butter.
- A mixed economy is an economy that is one in which public and private
sectors play important roles.
- The economic role of government in mixed economies can include; public
works, tax collections ,and income redistribution.
- The law of demand states that, other things being constant, the higher
the price of a good ,the lower is the quantity demanded.
- The law of supply implies that, other things being constant, the
higher the price of a good , the higher the quantity supplied.
- If the price is above equilibrium, then there will be a surplus.
- The price of a good will increase if the supply of a good decreases.
- If x is an inferior good and consumer income rises, the demand for
x will decrease and thus the price and the quantity traded will decrease.
- If x and y are substitute goods (in consumption) and the price of
x increases, we will observe a decrease in price but an increase in
the quantity traded of y.
- If x and y are complementary goods (in consumption) and the price
of x increases, we will observe a decrease in the price and the quantity
traded of y.
- If a market is said to be in equilibrium, then the quantity demanded
and the quantity supplied will be the same.
- A technological improvement in the production of good x will shift
the supply curve for good x to the right.
- Income, taste, and substitution factors would shift demand curve
to the right.
- Technology, cost of production, and consumer's preference would shift
supply curve to the right.
- The functional distribution of income refers to the distribution
of income according to basic resource classes, i.e., wages, rents, interest,
and profits.
- If a product generally has an expected life of six months, it is
classified as a nondurable good.
- If a company owns plants at various stages of the production process,
this is an example of a vertical combination.
- One of the major advantages of the sole enterprise and partnerships
is that they have to pay a single tax.
- One of the major disadvantages of sole enterprise and partnerships
is unlimited liability.
- The major advantage of corporations is that owners have limited liability.
- The major disadvantage of corporations is that they pay double taxation.
- The primary way that government deals with monopoly is to regulate
the monopoly firm.
- An example of a negative externality is a neighbor who plays loud
music and makes a lot of noise.
- Public education, public health programs, and requiring drivers to
undergo periodic eye examinations generate spillover benefits or positive
externalities.
- The two largest sources of revenue for the Federal government are
personal income taxes and social security taxes.
- The marginal tax rate is the increase in taxes as a percentage of
an increase in income. The largest revenue and expenditure categories
for local governments are, respectively; property taxes and spending
for education.
- The ups and downs of real GDP are called business cycles.
- An increase in aggregate demand in the classical model leads to higher
prices and constant output.
- Malthus's prediction of the stabilization of the economy at subsistence
levels ignored the possibility of technological change.
- Malthus focused his theory of economic growth on the land-to-labor
ratio.
- Personal income taxes are examples of fiscal policy instruments.
- The effects of business cycles tend to affect even non- economic
matters like births and alcoholism.
- According to classical theory, the national output moves up and down
inresponse to movements in the aggregate supply curve.
- According to Keynesian theory , the national output moves up and
downin response to movement in the aggregate demand.
- The AD curve shifts out when the government increases its expenditureat
every price level.
- A short-run aggregate supply curve will shift ( to the right) when
new firms enter markets and the economy expands.
- Stagflation can be caused by supply shocks.59) Aggregate demand is
negatively sloped because a higher price level causes reduced spending
on our domestic output.
Basil Al Hashimi
Please be sure to visit each of the following links:
Please contact Basil
al Hashimi for comments or corrections email
Red Mountain Campus phone:
480-654-7715 see a map
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