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Economics

Economics. 101. Economics. Economics is the study of the production and consumption of goods and the transfer of wealth to produce and obtain those goods. . What is the Point?. Economics explains how people interact within markets to get what they want or accomplish certain goals.

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Economics

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Presentation Transcript

  1. Economics 101

  2. Economics • Economics is the study of the production and consumption of goods and the transfer of wealth to produce and obtain those goods.

  3. What is the Point? • Economics explains how people interact within markets to get what they want or accomplish certain goals. • Since economics is a driving force of human interaction, studying it often reveals why people and governments behave in particular ways.

  4. Really what is the Point Mrs. Mangieri? • http://www.youtube.com/watch?v=afEqMX9YGCY

  5. Macroeconomics • takes a much broader view by analyzing the economic activity of an entire country or the international marketplace.

  6. Microeconomics • focuses on the actions of individuals and industries, like the dynamics between buyers and sellers, borrowers and lenders.

  7. Video of differences • http://www.youtube.com/watch?v=DJG-liA19eY

  8. An equilibrium point is described as the intersection between the supply and the demand curve. The equilibrium price is the point that will equate buyer’s willingness to purchase a specific product along the demand curve. At the equilibrium point there is no tendency to vary the amount supplied or vary the amount demanded. There is no shortage or excesses in this market. The behavior of both the buyers and the seller is try to make the best bargain in the market  and act in the most rational way. This will make the market to always adjust itself to equilibrium. If we suppose that a company that manufactures bolts produced about three million bolts. We also assume that to produce these bolts the company incurs a cost of $ 4 million. Therefore the company must receive revenue of amount $ 4 million to cater for all these costs. At this point the firm will be making zero profits. The company will have to add up a profit margin to make profit out of this venture. The buyers will also be willing to buy the bolts at a price slightly above $ 4 million but not according to the company margin of profit. If the sellers stick to their prices it means that less will be demanded and the bolts supply will accumulate in the store making the company to incur extra warehousing costs. If the company was to sell the bolts below the $ 4 million then the company will incur losses. Therefore the bolt company is not wiling to sell the bolt at these prices. The venture is not also economically viable if the company decide to sell at this price. The company will therefore sell the bolts at a price that gives a profit margin but which the buyers are willing and able to buy the bolts at from the market. Therefore an equilibrium point is reached where both the supplier and the buyers are willing and able to make the transaction. • If the bolts consumers were willing to pay for each additional bolt output but the supplier was not in the capacity to supply this product then there exists a shortage in the market. The shortage will not last long since more company will enter in this market to take advantage of the profit opportunity.

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