Digital Planning-economics-cp-binus@bandung-LC02

By JassonGunawan1 | Updated: April 24, 2019, 11:33 a.m.

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ECONOMICS 
Jasson Gunawan 
Alexander Rushell 
Steven Cornelius 
The right answer for marginal decisions involving consumption is that the marginal utility per dollar spent on each good must be the same at the optimal consumption bundle. By factoring in prices, this comparison takes into account the fact that a consumer has a limited amount of money to spend.
The income effect of a change in the price of a good is the change in the quantity consumed of that good that results from a change in the consumer’s purchasing power due to the change in the price of the good. Normal Goods Inferior Goods Giffen Goods
Economics is the social science that studies the production, distribution, and consumption of goods and services.
Market economy is economy in which decisions about production and consumption are made by individual producers and consumers.
1.Resources are scare
2.The real cost of something is what you must give up to get it 
3.“How much?” is a decision at the margin 
4.People usually take advantage of opportunities to make themselves better off 
Basic principle  
 When a market is competitive, its behavior is well described by the supply and demand model. Because many markets are competitive, the supply and demand model is a very useful one indeed
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The law of demand says that a higher price for a good or service, other things equal, leads people to demand a smaller quantity of that good or service.
An Increase Supply 
A budget constraint requires that the cost of a consumer’s consumption bundle be no more than the consumer’s total income. A consumer’s consumption possibilities is the set of all consumption bundles that can be consumed given the consumer’s income and prevailing prices. A consumer’s budget line shows the consumption bundles available to a consumer who spends all of his or her income.
Economists believe that shifts of the supply curve for a good or service are mainly the result of five factors
1.Changes in input prices
 2.Changes in the prices of related goods or services 3.Changes in technology 
4.Changes in expectations 
5.Changes in the number of producers 
Individual producer surplus is the net gain to an individual seller from selling a good. It is equal to the difference between the price received and the seller’s cost.  
Total producer surplus is the sum of the individual producer surpluses of all the sellers of a good in a market  
Price controls are legal restriction on how high or low a market price may go. They can take two forms : a price ceiling, a maximum price sellers are allowed to change for a good aor service, or a price floor a minimum price buyers are required to pay for a good or service 
A quantity control is an upper limit on the quantity of some good that can be bought or sold. The total amount of the good that can be legally transacted is the quota limit.
The demand price of a given quantity is the price at which consumers will demand that quantity.
The supply price of a given quantity is the price at which producers will supply that quantity. A quantity control, or quota, drives a wedge between the demand price and the supply price of a good; that is, the price paid by buyers ends up being higher than that received by sellers.
What Factors Determine the Price Elasticity of Demand? Whether the Good Is a Necessity or a Luxury The Availability of Close Substitutes Share of Income Spent on the Good Time Elapsed Since Price Change
The Availability of Inputs, The price elasticity of supply tends to be large when inputs are readily available and can be shifted into and out of production at a relatively low cost. Time, The price elasticity of supply tends to grow larger as producers have more time to respond to a price change. This means that the long- r un price elasticity of supply is often higher than the short- run elasticity.
The incidence of a tax is a measure of who really pays it.
The wedge between the demand price and supply price becomes the government’s “tax revenue.”  
If the goal in choosing whom to tax is to minimize deadweight loss, then taxes should be imposed on goods and services that have the most inelastic response—that is, goods and services for which consumers or producers will change their behavior the least in response to the tax.
In a well-designed tax system, there is a trade-off between equity and efficiency: the system can be made more efficient only by making it less fair, and vice versa.
Income tax: a tax that depends on the income of an individual or a family from wages and investments
 Payroll tax: a tax that depends on the earnings an employer pays to an employee 
Sales tax: a tax that depends on the value of goods sold (also known as an excise tax)
 Profits tax: a tax that depends on a firm’s profits Property tax: a tax that depends on the value of property, such as the value of a home
 Wealth tax: a tax that depends on an individual’s wealth
Economic Profit is equal to revenue minus the opportunity cost of resources used. It is usually less than the accounting profit.

Capital is the total value of assets owned by an individual or firm— physical assets plus financial assets
the marginal benefit of producing a good or service is the additional benefit earned from producing one more unit. However, this time the numbers are decreasing rather than increasing. The first year of schooling gives Alex a $300,000 increase in the value of his lifetime earnings.
According to the profit-maximizing principle of marginal analysis, when faced with a profit-maximizing “how much” decision, the optimal quantity is the largest quantity at which the marginal benefit is greater than or equal to marginal cost.
A production function is the relationship between the quantity of inputs a firm uses and the quantity of output it produces. A fixed input is an input whose quantity is fixed for a particular period and cannot be varied. A variable input is an input whose quantity the firm can vary at any time.
The long run is the period in which all inputs can be varied. The short run is the period in which at least one input is fixed. The total product curve shows how the quantity of output depends on the quantity of the variable input, for a given quantity of the fixed input
The disparity between France and the United States is striking, given that they are both wealthy countries with comparable agricultural technology. In the United States, farmers receive payments from the government to supplement their incomes, but European farmers benefit from price floors. In poor countries like Uganda and Ethiopia, foreign aid can lead to significantly depressed yields. Foreign aid from wealthy countries has often taken the form of surplus food, which depresses local market prices, severely hurting the local agriculture that poor countries normally depend on

Digital Planning-economics-cp-binus@bandung-LC02

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