2 Ways of calculating  GDP

1. EXPENDITURE APPROACH

       - add up all of the spending on final goods and services produced on a given year.

GDP= C+ Ig + G + Xn

C= Personal Consumption Expenditures

Ig= Gross Private Domestic Investment

G= Government Spending

Xn= (Exports - Imports)

***Xn= exports - imports DO NOT PUT IN EQUATION TILL YOU FIND EXPORTS- IMPORTS!!**

(Most favorable, because it can be proven by receipts, paper work, documents)

2. INCOME APPROACH

   -add up all the income that resulted from selling all final goods and services produced in a given year.

WILLY REST IN PEACE + STATISTICAL ADUJUSTMENT 

GDP= W + R + I + P + S

W= wages

R= Rent

i= Interest

P=Profits

S= Statically Adjustment

       1. In direct business taxes

        2. depreciation (consumption of fixed capital)

         3. Net foreign factor payment

Gross Domestic Product (GDP)- total market value of all final goods and services produced within a countries border in given year.

Gross national Product (GNP)- total market value of all final goods and services by citizens of that country on its land or foreign land.

INCLUDED IN GDP

Spending %                    Letter Symbol                   Meaning

65%                                        C                             Personal consumption expenditures

                                                                             (your own money, wages, income)

 17%                                        Ig            Gross private domestic investment  

                                                                                     1) Factory equipment maintenance 

                                                                                     2) New factory equipment

                                                                                      3) Construction of housing

                                                                                      4) Unsold inventory of products built in a year                                                                                        (houses that haven't had anyone move in)

20%                                             G                              Government spending

-2%                                             Xn                               (Exports- Imports)

WHAT IS NOT INCLUDED IN GDP

1. Intermediate Goods

  -Goods that require further processing, before ready for final use

   (car, all needs for a car such as window, gas tank, engine)

2. used/ second hand goods

  -avoid double counting (thrift shop clothes)

3. Purely Financial Transaction

  - such as stocks and bonds

  - does not involve the product of goods and services. It is mainly a transient of assets.

  -something that is durable

4. Illegal Activity 

    - drugs

5. Unreported Business Activities 

     (unreported tips)

6. Transfer Payments

   -Public ( social security checks, welfare)

  -private (scholarships)

7. Non- Market Activity

(volunteering, baby sitting, performing work for your self such as fixing the roof on your own home)

   

Unit 2

Circular Flow- It represents a transaction in a company.

There are 2 markets:

1) Product Market- This is the place where goods and services are produced by businesses and they are bought by households.

2) Factor/ Resource Market- This is the place where households sell resources and businesses buy resources.

Firms- an organization that produces goods and sales

Households- Person or group of people that share their income
                      -Sells factors of production to businesses
                      EX: Waking up to school you are using factors of productions

**Firms rent or purchases land, which will be found in factor market**

**Business demand resources from other businesses is also the factor market.**

Business Cycle

4 Phases of the Business Cycle

*Peak- highest point of real GDP
          -exhibits greatest expending and lowest unemployment

*Expansion- real GDP increasing
                   - caused by increased in spending and decrease in unemployment

*Contraction/ Recession- real GDP declining for 5 months due to reduction in spending and increase                                            in unemployment

*Trough- lowest point of real GDP
              has the least amount of spending and highest amount of unemployment

Demand and Supply

Demand

Demand- quantities that people are willing and able to buy at varies prices.

The Law of Demand- states that there is an inverse relationship between price and quantity demanded.

What causes a "Change in quantity demanded?"- change in price (change in QD)

What causes a "change in demand"?
1. Change in buyer's taste (advertisement)
2. Change in the number of buyer's (population)]
3. Change income (Normal/ Inferior goods)
                               eating good/eat good to bad
4.Change in the price of related goods (Complementary goods/ Substitute goods)
                                                           french fry with burger     / instead of ketchup use mustard
5. Change in expectations (looking out for the future)

Supply

Supply- the quantities that producers or sellers are willing or able to produce at varies prices

The Law of Supply- direct relationship between price and quantity supply (Price goes up, quantities go up or price goes down, quantities go down)

What causes a "change in quantity supplied"? (change in QS) - change in quantity demand

What causes a "change in supply"? (change in S)
1. Change in weather
2. Change in the number of sellers/ suppliers
3. Change in technology
4. Change in the cost of production
5. Change in taxes or subsides (money that the government supplies)
6. Change in expectations

Production Cost Notes 1/14/15

Fixed Cost- a cost that does not change no matter how much is produced.
                 Examples: rent, mortgage, insurance, salary

Variable Cost- a cost that rises or falls depending on how much is produced.
Example: electricity

Marginal Cost- cost of producing one more unit of a good.

**Revenue brings in money
** Cost is when money is gone

Acronyms
   Q- Quantity
TFC- Total Fixed Cost
TVC- Total Variable Cost
TC- Total Cost
MC- Marginal Cost
AFC- Average Fixed Cost
AVC- Average variable Cost
ATC- Average Total Cost


Formulas
TFC+TVC= TC                                

AFC+AVC= ATC

TFC
------ =AFC
   Q

TVC
------- = AVC
   Q

TC
----- = ATC
  Q

TFC= AFC * Q

TVC= AVC * Q

MC= New TC- Old TC

Here is a great video to reference at for business Mangement, cost of production, cost of supplies , balancing inventory with final product cost, and everything you need that revolves around money ! Copy and paste link below into a web browser ! Enjoy :)
https://m.youtube.com/watch?v=IqvoxkBAlEw

January 13, 2016 Notes

Elasticity of Demand
              -A measure of how consumer react to a change in price.
Elastic Demand
             -Demand that is very sensitive to a change in price.-
             - E>1 (Elastic greater than 1)
             -always greater than one
             - product is not a necessity and there are available substitutes
Inelastic Demand
             -Demand that is not very sensitive to a change in price
             - E<1 (Elastic is less than 1)
             -always less than one
             -few or no substitutes
             -people will buy no matter what
Unit/ Unitary Elastic
             - E=1 (Elastic equals 1)

Examples :               Elastic Demand              Inelastic Demand    
                             *soda                                   *gas
                             *steaks                                 *salt
                             *candy                                 *insulin/medicine
                             *fur coats                             *milk
                                                                          *toothpaste


Price Elasticity of Demand (PED)
STEP 1: Quantity
                                                  New quantity-old quantity
                                                --------------------------------- = quantity
                                                          old quantity



STEP 2: Price                          New Price- old price
                                                -------------------------- = price
                                                          old price



STEP 3: PED                               % change in quantity in demand
                                                   ----------------------------------------- = PED
                                                                % change in price

Total Revenue- total amount of money affirmed receives from selling goods and services

                                     TR= P * Q
P= price
Q= quantity






Examples questions:

1. The price of Venti Starbucks lattes went from  $3.94 to $4.02 this past summer, and the amount of daily sales of Venti- sized lattes went from 242/day to 228/day. Are the lattes elastic, unitary elastic or inelastic?

 STEP 1: Quantity

                                                    New quantity-old quantity
                                                --------------------------------- = quantity
                                                          old quantity

                                                       228- 242
                                                      ------------ = -.06= 6%
                                                          242

STEP 2: Price
                                               

                                                  New Price- old price
                                                -------------------------- = price
                                                          old price
                                                         
                                                    4.02-3.94
                                                   ------------- = .02= 2%
                                                        3.94
STEP 3: PED

                                                  

                                                  % change in quantity in demand
                                                   ----------------------------------------- = PED
                                                                % change in price

                                                             -5.79
                                                           --------- = 2.85 = 3
                                                              2.03

This problem is an Elastic demand, because 3 is greater than 1.
3 elastic > 1



2. The price of Moo iced coffee drink has risen from $1.50 to $1.70 per 500 ml container. Sales at your corner store of "Moo" fall from 500 container per week to 300 containers per week.

STEP 1 : Quantity                              300- 500
                                                         -------------- = .4= 40%
                                                               500

STEP 2: Price                                         1.70- 1.50
                                                            -------------- = .13= 13%
                                                                  1.50

STEP 3: PED                                              40
                                                                  ------ = 3.08
                                                                    13
This problem is an elastic demand, because it is greater than 1.
3 elastic > 1


******************ONLY HAVE 2 NUMBERS AFTER DECIMAL PLACES***************
                                               

Unit I/ Topic 2

-Production Possibilities Curve (PPC)
                                        Frontier (PPF)
                                        Graph (PPG)
Graph (PPG)- shows alternatives ways to use economy resources.

4 Assumptions of a PPG
1. Two goods
2. Fixed resources (land,labor,capital's, entrepreneurship)
3.Fixed technology
4.Full employment of resources (all used equally)


Vocabulary
1. Efficiency- using resources in such a way to maximize production of goods and services.
2. Allocation Efficiency- products of being produced are the ones most desired by society.
3. Productive Efficiency- products are being produced in the least costly way, this is any point on the production possibility curve.
4. Under utilization-using fewer resources  than an economy is capable of using.





Here is an example of a Production Possibilities Curve, it is the same way we have learned in class just has 3 extra letters which all mean the same thing according to the key on this graph. In this case, A,B,C,D,E are all attainable and efficient. Letter F, is inside the curve, because it is attainable but inefficient and under utilization. Letter G, is on the outside of the curve, which is unattainable and would represent technology, and/or economic growth.


3 Types of Movement that Occur in a PPG
1. Inside the PPC
        - Occurs when resources or unemployed or underemployed (no productive efficiency)
2. Along the PPC
3.Shifts of the PPC


Types of shifts of the PPC (increasing and decreasing)

What causes the PPC/ PPF to shift?
1. Advance in technology
2. Change in resources
3. Change in the labor force
4. Economic growth
5. Natural disasters/war famine
6. More education and training (human capital)

Just a review over the PPG
*Inside the curve= attainable, but inefficient and under utilization
*On the curve= attainable, efficient
*Outside the curve attainable

Unit I Intro

Macroeconomics (big picture)                            VS.                    Microeconomics (small picture)
-the study of the economy as a whole                                           -the study of individuals or
    *international trade                                                                  specific  units of the economy
       *wage laws                                                                               *supply and demand
       *inflation's                                                                                *market structure                                                                                                                                        *business organizations



Positive economics ("What is")                           VS.                  Normative economics
-attempt to describe the world as is.                                             -attempts to prescribe how the
(very descriptive)                                                                           world should be.
-collects:presents facts                                                                (very descriptive in nature)    
                                                                                                                    *"Ought to be"
                                                                                                                    *"Should be"



Needs                                                                    VS.                        Wants
-basic requirement for survival                                                            -Desires of citizens
(Food,water, shelter, clothing)


Goods                                                                     VS.                         Services
-tangible commodities                                                                           -work performance for someone
-capital goods
        *items used in the creation of
           other goods
-consumer goods
        *goods that are intended for
          final use by the consumer


Scarcity                                                                  VS.                    Shortage
-most fundamental economic problem                                           -quality demanded >quality supplies
that mall society faces.                                                                         (QD>QS)
            *how to  satisfy unlimited wants
             with limited resources.
-oil

Factors of Production
1. Land- natural resources
2. Labor-work force
3. Capital- human capital (skills)
               -physical capital (tools, machinery,
                 factories)
4. Entrepreneurship- innovate, risk taker
                     

Factors of Productions
-resources required to produce goods in services
(land, labor, capital's, entrepreneurship)


Trade offs
-alternatives we give up when we choose one course of action over another
(ex. Not going to school, so instead you sleep at home)
(ex. Bring your lunch rather than buying your lunch)

-Opportunity cost: next nest alternatives
(ex. You are at a restaurant you ask for apple juice, but the waitress told you they ran out. Since there is no apple juice you ask for one of your alternative choice which is orange juice, but they do not have orange juice, so finally you ask for water and they are able to provide you with water.)