Goods and Services

One of the most basic ideas in economics is goods and services. More than anything else,
money is spent on goods and services. It helps to know the difference between two.
A good is something that you can use or consume, like food or CDs or books or a car or
clothes. You buy a good with the idea that you will use it, either just once or over and over
again.
A service is something that someone does for you, like give you a haircut or fix you dinner
or even teach you social studies. You don't really get something solid, like a book or a CD,
but you do get something that you need.

Opportunity Cost

A benefit, profit, or value of something that must be given up

to acquire or achieve something else. Since every resource (land, money, time,
etc.) can be put to alternative uses, every action, choice, or decision has
an associated opportunity cost.
Opportunity costs are fundamental costs in economics, and are used
in computing cost benefit analysis of a project.

'NORMAL GOOD'
An economic term used to describe the quantity demanded for a particular good
or service as a result of a change in the given level of income. A normal good is
one that experiences an increase in demand as the real income of an individual
or economy increases.

MARGINAL COST OF PRODUCTION'

The change in total cost that comes from making or producing one additional
item. The purpose of analyzing marginal cost is to determine at what point an
organization can achieve economies of scale. The calculation is most often used
among manufacturers as a means of isolating an optimum production level.

'MARGINAL BENEFIT'
The additional satisfaction or utility that a person receives from consuming an
additional unit of a good or service. A person's marginal benefit is the maximum
amount they are willing to pay to consume that additional unit of a good or
service. In a normal situation, the marginal benefit will decrease as consumption
increases.

Substitute Goods

Substitute goods are two goods that could be used for the same purpose.

If the price of one good increases, then demand for the substitute is likely to rise.
Therefore, substitutes have a positive cross elasticity of demand.

Band Wagon Effect :People sometimes demand a commodity because others are purchasing it in order to be faisionable
Production Possibility Curve :A line that describes the two production, PPC shows different combination of two goods and that
combination can be or cannot be produced
The production Possibility is called marginal rate of transformation
Market Equilibrium is the situation when quantity deny = Quantity Supplied
Trade Off giving up something to get Something

P=30-Q/200, Q = 6000 - 200P

a. Compute the point elasticity at P=$10; at P=$15
Q1 = 4000, Q2 = 3000
Point Price Elasticity of Demand is given by the formula Ed= (P/Q)(Q/P).
Q/P is the derivative of the demand function, so it equals -200.
At price P=$10 we calculate
Ed1 = 10/4000*(-200) = -0.5, so the demand is inelastic.
At price P=$15 we calculate
Ed2 = 15/3000*(-200) = -1, so the demand is unit-elastic.
b. How does the point elasticity vary with the price?
As we can see with the increase of price, the point elasticity decreases, so the demand becomes more
elastic.