Summary Principles of Economics, ISBN: 9780077132736 micro economics
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Micro economie
Institution
Nyenrode Business Universiteit (Nyenrode)
Book
Principles of Economics
A thorough summary of the micro economy part of the book Principles of Economics. Thanks to this summary, almost the entire academic year passed the exam, a highly recommended one!
College aantekeningen ECT - Economics and Tourism (CBTO1ECT) Principles Of Economics, ISBN: 9780077132736
Samenvatting Principles Of Economics, ISBN: 9780077132736 ECT - Economics and Tourism (CBTO1ECT)
Economics for IB Midterm Summary
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Micro economie
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Chapter 1: Thinking like an economist
Economics is the study of how people make choices under conditions of scarcity and of the
results of those choices for society.
Scarcity principle also called the no-free-lunch principle, we have boundless needs and
wants but the resources are limited. Having more of one thing almost always means that you
have less of other things.
Cost-benefit Principle an entity should only take action if, and only if, the extra benefits
from taking that action are at least as great as the extra costs. Choice involves compromise
between competing interests.
We gaan ervan uit dat mensen in economie rationeel handelen.
Economic surplus the surplus from taking any action is the benefit of taking that action
minus its cost.
Opportunity cost of an activity is the value of the next best alternative that must be forgone
in order to undertake the activity. The value of the next best alternative.
Four important decision pitfalls
1. Measuring costs and benefits as proportions rather than absolute money amounts.
a. Which is more valuable, saving $100 on a $2000 tickets or $90 on a $200
tickets.
2. Ignoring opportunity costs.
3. Failure to ignore sunk costs.
a. A sunk cost is a cost that is beyond recovery at the moment a decision must
be made. Because sunk costs must be borne whether or not an action is
taken, they are irrelevant to decision of whether to take the action.
4. Failure to understand the average-marginal distinction. Moet je dus meer gaan
produceren of niet, ga dan marginaal denken.
a. Marginal cost zijn dus de kosten verbonden met het produceren van een
product meer.
b. Marginal benefit, ofwel marginale omzet. The increase in total benefit that
results from carrying out one additional unit of an activity.
c. Average cost, totale kosten gedeeld door totale productie.
d. Average benefit, totale omzet gedeeld door totale productie.
Microeconomics is the study of individual choice under scarcity, and its implications for the
behaviour of prices and quantities in individual markets.
Macroeconomics is the study of the performance of national economies and the policies
that governments use to try to improve that performance.
Chapter 2: Markets, specialisation and economic efficiency
Absolute advantage: If an hour spent in performing a task earns more than the other
person can earn in an hour at the task. Dus als iemand iets gewoon beter kan produceren.
In de economie verwijst het principe van absoluut voordeel naar het vermogen van een partij
om een grotere hoeveelheid van een goed, product of dienst te produceren dan
concurrenten, met dezelfde hoeveelheid middelen.
, Comparative advantage: If your opportunity cost of performing a task is lower than the
other person’s opportunity cost. Comparatief voordeel is het handelsvoordeel dat een land
behaalt in een situatie van vrijhandel, wanneer het een bepaald product goedkoper kan
produceren dan een handelspartner, zelfs wanneer één land alle verhandelbare producten
voordeliger kan produceren dan het andere land.
The principle of comparative advantage: everyone does best when each person or
country concentrates on the activities for which his or her opportunity cost is lowest.
We can together produce more than if we all tried to be self-sufficient.
Production possibilities curve PPC: A graph that describes the maximum amount of one
good that can be produced for every possible level of production of the other good.
Oppu cost is loss in divided by gain in
In a PPC and PPF you have an attainable point, an unattainable point, an inefficient point
and an efficient point.
PPF is a production possibility frontier, describes the max amount of one good that can be
produced for every possible level of production of the other good.
The greater the differences among individual oppu costs, the more bow-shaped the PPF will
be, and the more bow-shaped the PPF, the greater will be the potential gains from
specialisation.
Economic growth is the main cause for a shift in the PPF.
PPF= a summary of the production options open to any society.
PPF slope downwards because of the scarcity principle.
Specialisation in a product has a lot of advantages, but also disadvantages; unskilled
workers in high-wage countries may be hurt in the short run by the reduction of barriers to
trade with low-wage nations.
Chapter 3: Markets, supply, demand and elasticity
Market: The market for any good consists of all buyers or sellers of that good.
Demand curve: A schedule or graph showing the quantity of a good that buyers wish to buy
at each price.
Substitution effect: The change in the quantity demanded of a good that results because
buyers switch to substitutes when the price of the good changes.
Income effect: The change in the quantity demanded of a good that results because of a
change in real income of purchasers arising from the price change.
Buyer’s reservation price: The largest money amount the buyer would be willing to pay for
a unit of a good. Dus consumentensurplus.
Supply curve: A curve or schedule showing the quantity of a good that sellers wish to sell at
each price.
Seller's reservation price: The smallest money amount for which a seller would be willing
to sell an additional unit, generally equal to marginal cost.
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