Saturday, August 18, 2007

Economics 101

Graph from text from "Economics" by Krugman and Wells
A fairly basic supposition of economics lays the groundwork for the consumer society, not the "...very hard..." comment.
Why do the choices I make interact with the choices you make? A family could try to take care of all its own needs—growing its own food, sewing its own clothing, providing itself with entertainment, writing its own economics textbooks. But trying to live that way would be very hard. The key to a much better standard of living for everyone is trade, in which people divide tasks among themselves and each person provides a good or service that other people want in return for different goods and services that he or she wants.
How hard is hard enough w/o taking everything out of the planet to support our "quality of life"?

Oh boy, look what elese I learned today.
  • Demand is perfectly inelastic if it is completely unresponsive to price. It is perfectly elastic if it is infinitely responsive to price.
  • Demand is elastic if the price elasticity of demand is greater than 1; it is inelastic if the price elasticity of demand is less than 1; and it is unit-elastic if the price elasticity of demand is exactly 1.
  • When demand is elastic, the sales effect of a price increase dominates the price effect and total revenue falls. When demand is inelastic, the price effect of a price increase dominates the sales effect and total revenue increases
  • Because the price elasticity of demand can change along the demand curve, economists mean a particular point on the demand curve when referring to the price elasticity of demand.
  • The availability of close substitutes makes demand for a good more elastic, as does the length of time elapsed since the price change. Demand for a necessary good is less elastic, and more elastic for a luxury good.
I just finished two marathon days of study on micro and macroeconomics in preparation for a "diagnostic exam". this will apparently either qualify me for starting without remedial economics class or to assess where I need to spend my prep time before school starts in October. I had forgotten what it was like to study, and exercise one's analytical capacities. It was pretty darn frustrating, but also encouraging when I felt like I was starting to "get it".

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