More GDP Calculations (1/30 - 1/31)

Expenditure Approach to GDP:

C + Ig + G + Xn

Income Approach to GDP:

(Wages/Compensation/Salary) + Rent + Interest + Profits + Statistical Adjustment

Budget:

Gov't Purchase of Goods/Services + Gov't Transfer Payment - Gov't Tax&Fee Collection

Positive Budget - Deficit

Negative Budget - Surplus

Trade:

Exports - Imports

+ Trade - Surplus

- Trade - Deficit

National Income:

1) Compensation of Employees + Rental Income + Interest Income + Proprietor's Income + Corporate Profits

2) GDP - Indirect Business Taxes - Depreciation - Net Foreign Factor Payment

Disposable Personal Income:

Nat'l Income - Personal Household/Income Taxes + Gov't Transfer Payments

Gross Domestic Product

Gross Domestic Product and

Gross National Product (1/26 - 1/27)

GDP - total value of all product of all final goods and services produced w/in a country's borders in a given year

• includes all production/income earned w/in U.S. by U.S. and foreign producers
• excludes productions outside of U.S. earned by Americans

GNP - total value of all goods and services produced by Americans in a given year

• includes production/income by Americans anywhere in the world
• excludes production by non-Americans even by the U.S.

GDP Calculations

GDP = C + Ig + G + Xn

C - Personal Consumption Expenditures, 67% of economy

Ig - Gross Private Domestic Investment, 17% of economy

G - Gov't Spending, 18% of economy

Xn - Net Exports (Exports - Imports), -2% o economy

Not Included in a nation's GDP:

1. Intermediate Goods: avoids double or multiple counting

2. Used/Second Hand Goods:thrift store

3. unreported business activities: tips

4. stocks & bonds

5. non market activities: babysitting for family

6. illegal activities: underground stuff and black market

7. Gifts/transfer payments: Scholarships, Social Security, Unemployment

728 × 546 - wikihow.com

Circular Flow Model

Circular Flow Model

While The Picture is Self - Explanatory,  I Shall Continue to Edit Additional, More Clear Info

Household - a person or group who shares income

Firms/Businesses - organizations that produces goods/services for sale

Excess and Equilibrium

Excess and Equilibrium (1/19)

• Equilibrium - point at which the supply curve intersects w/ the demand curve, efficient
• Excess Demand - occurs when QD > QS
• results in shortage, consumers cannot get quantities of wanted
• Price Ceiling - creates a shortage; when gov't places legal limit on how high the price of a product can be
• Ex - flu shot, rent ctrl
• Excess Supply - occurs when QS > QD
• results in surplus; producers have inventories they cannot rid
• Price Floor - lowest legal price a commodity can be sold at
• Ex - minimum wage

Notes About Revenue

Notes about Revenue (1/12-1/13)

• Total Revenue - total amount of $ a firm receives from selling goods & services;
• TR = P * Q
• Remember to add a $ to the answer
• Marginal Revenue - additional income from selling of additional unit of a good
• Final TR - Initial TR = MR
• Fixed Cost - a cost that does not changed no matter how much of a good is produced
• Ex - salary, rent
• Variable Cost - a cost that rises and falls depending upon how much is produced
• Marginal Cost/Output
• new Total Cost - old Total Cost

More Revenue Calculations

Total Fixed Cost - TFC
Total Variable Cost - TVC
Total Cost - TC
Average Fixed Cost - AFC
Average Variable Cost - AVC
Average Total Cost - ATC

TFC + TVC = TC
AFC + AVC = ATC
AFC * Q = TFC
AVC * Q = TVC
TFC / Q = AFC
TVC / Q = AVC
TC / Q ATC

Elasticity of Demand

Elasticity of Demand (1/11)

• A measure in how consumers react to a Δ in price

Elastic Demand

• demand very sensitive to a Δ in price
• product not a necessity
• available substitutes
• Ex - steak, fur coat, soda
• E > 1

Inelastic Demand

• demand not very sensitive to a Δ in price
• product a necessity
• few to none substitutes
• Ex - gas, insulin
• E < 1

Unitary Elastic

• impossible in reality
• E = 1

Calculation for Price Elasticity of Demand (PED)

• Step 1: Quantity: new Q - old Q / old Q = %Δ in Q
• Step 2: Price: new P - old P / old P = %Δ in P
• Step 3: PED: %Δ in Q / %Δ in P = PED

Quick Blurb:Three Types of Movement That Occur in the PPG

Three Types of Movement That Occur in the PPG (1/5)

1. inside the PPC
2. along the PPC
3. shifts of the PPC

Factors of Production

Factors of Production (1/4)

• Land - natural resources
• Labor - work exerted
• Capital
• Human - ppl acquire skills & knowledge
• Physical - money, tools, buildings, equipment, machinery
• Entrepreneurship
• risk-taker, innovative

Trade-Offs

• Trade-off - alternative sacrificed when decision is made, scarcity = trade-offs
• Opportunity cost - type of trade-off, most desirable alt. given up as result of a decision
• Guns or Butter - refers to trade-off that the gov't makes when choosing whether to produce more or less military or consumer goods.
• Thinking at the Margins - deciding whether to +(increase) or -(decrease) 1 additional unit of some resource

The Production Possibilities Graph/Curve/Frontier (PPG,PPC,PPF) 

• graph that displays alt ways to use an economy's resources

Four Keys Assumptions abt PPG

1. Only 2 Goods can be Produced
2. Full Employment of Resources
3. Fixed Resources (factors of production)
4. Fixed Tech.

• Efficiency - using resources in such a way as to maximize production of goods & services, increases profits
• Underutilization - essential opposite of efficiency, using fewer resources that an economy is capable of using, decreases profits

Basic Concepts of Economics

Basic Concepts of Economics(1/3)

1.Macroeconomics vs. Microeconomics

• Macroeconomics is the study of economics as a whole (inflation, debt)
• Microeconomics is the study of individual/specific units of the economy (household & firms interactions in the market)

2.Positive vs. Normative Economics

• Positive Economics - Descriptive economics, collects & presents facts, attempts to describe the world as is.
• Normative Economics - Prescriptive economics, opinion-based, attempts to prescribe how the world should be.

3.Needs, or basic requirements for survival, vs. Wants, or desires

4.Scarcity vs. Shortage

• Scarcity - Permanent, most fundamental economic problem plaguing all societies
• Shortage - Temporary, Quantity Demanded (QD) > Quantity Supply (QS).

5.Goods vs. Services

• Goods -Tangible commodities (bought, sold, traded, produced)
• Capital Goods - items used in the creation of other goods
• Consumer Goods - intended for final use by consumer
• Services - Work performed for someone