Notes from my Macroeconomics class.

1. Bland Introduction
By: Chris Wilson

2. Production Possibilities Curve/Frontier
● The curve/frontier represents
the potential output of the
presented entity.
● Datapoints inside the
production-possibilities curve
(PPC) represent an under-
utilizing of resources.
● Datapoints outside the PPC
can’t occur, because they
use more resources than are
present.

3. Constant Cost Model
● The curve/frontier represents
the idealistic potential output
of the presented entity.
● By using a linear model, we
can make better comparisons
(rather than dealing with
“more complicated math”).
● Datapoints (0,9) and (9,0) are
possible on the ideal model.

4. Comparisons
● The U.S. has the absolute
advantage in the production
of guns because they can
produce absolutely more
guns.
● Repeat: butter.
● However, absolute
advantage shouldn’t be used
to determine production.

5. Figuring Out the Comparative Advantage (5 steps)
● Comparative advantage
means that one entity can
produce something at a lower
marginal opportunity
production cost than another
entity.
● Make a table.
● Go to the extremes (0,x) and
(x,0).
● Fill out the table.
● Understand the table.
{or guns!}

6. Production
● Specialization = good.
● Trade to accommodate for
other resource.
● No specialization = bad.

7. Production Possibilities Curve/Frontier
● When determining the “trade”
aspects, the number needs to
fall between the production
ratios (in this example, the
green circles represent these:
1 and 10).

8. {Let begin scary visual representations}

13. {End scary visual representations}

14. ● A non-linear supply &
demand curve
(equilibrium of (4,6))
changing to a new curve
by shifting the quantity
rightwards.
● Note change in supply
curve’s location changes
the passing-through of the
demand curve.

15. ● Changing the price doesn’
t change the demand, but
rather changes the
quantity demanded.
● Changing the demand
doesn’t change the
supply, but rather
changes the supply
demanded.

16. ● The income effect…
budget doesn’t change,
but widget price does. As
price falls, quantity
demanded rises; as price
rises, quantity demanded
falls.

17. ● The substitution effect…
as the relative price rises
for Product A, the quantity
demanded falls.
● As the relative price falls
for Product A, the quantity
demanded rises.

18. ● The diminishing marginal
utility… you are willing to
purchase more and more
of a good/service only if
the price goes down.

19. The determinants of demand
are:
● Number of consumers
● Income normal goods
● Income inferior goods
● Preferences
● Prices of related products
(substitutes)
● Prices of related products
(complements)
● Expected future prices by
consumer
● Expected future income
by consumer
{CompetingCola}

20. “Understand these concepts, combat
these concepts, and relearn these
concepts.”
--Brunette and Ruff--