Elasticity

Elasticity:
-it is a numerical estimate
-it measures the response to a change in price or to a change in any others factors that determine the demand or supply of a product

Elasticity is the extent to which buyers and sellers respond to a change in market conditions.

PED.
Price Elasticity of Demand is the responsiveness of quantity demanded to a change in the price of the product. 

PED = (% change in quantity demanded / % change in price)

Price Elastic: where the % change in the quantity demanded is sensitive to a change in price.
Price Inelastic: where the % change in the quantity demanded is insensitive to a change in price.

PED > 1 elastic
PED < 1 inelastic
PED = 1perfectly elastic

PES.
Price Elasticity of Supply is the responsiveness of quantity supplied to a change in the price of the product.
PES = (% change in quantity supplied / % change in price)

PES > 1 elastic
PES < 1 inelastic
PES = 0 perfectly inelastic

YED.
Income Elasticity of Demand is the responsiveness of demand to a change in income.
YED = (% change in quantity demanded / % change in income)

YED > 1 normal goods ( goods with a positive income elasticity of demand)


YED < 1 inferior goods( goods for which an increase in income leads to a fall in demand)


XED.
Cross Elasticity of Demand is the responsiveness of demand for one product to a change in price of another product.
XED = (% change in quantity demanded of a product A / % change in price of a product B)

XED >0 substituted goods
XED < 0 complementary goods

Economic systems and the role of the market

Economic System : the way in which production is organised in a country or group of countries.
This is the term, which describes that country's people, organisations and government always have to make dicisions with respecct to:
- What to produce?
- How to produce?
- Who gets it?

There are 3 main types of economic system:
-market economy
-command economy or centrally planned economy 
-mixed economy


Market economy ia an economic system whereby resources are allocated through the market forces of demand and supply. Here, price and the free operations of the price system are central to the way in which resources are allocated.
Price system is a method of allocating resources by the free movement of prices.


Command economy is an economic system in which most resourses are state owned and also allocated centrally.

Mixed economy is an economic system in which resources are allocated through a mixture of the market and direct public sector involvement.

PPC

Production Possibility Curves.
This shows the max quantities of different combinations of output of two products,given current resources and the state of technology.
PPC is used to show how resources are allocated.
The major difference between a developing economy and a developed economy is that, developing economy is an economy with a low level of income per head and developed economy is an economy with a high level of income per head.


There are 2 reasons,why there may be a shift outwards of a production possibility curve:
- more resources or economic growth(change in the productive potential of an economy)
- techological change

20/10/09

Awful weather. I have a headache.

about demand

Derived demand i when demand for one good or service occures as a result of demand for another.

Joint demand is a type of demand when the demand for 2 or more products are independent, because they are used together.

Complementary demand is a type of demand where products are used in conjunction with one other.

Competitive demand is when products are substitutes for each other.

Factors of production.

There are 4 main factors of production,where the resources are available in economy:
Factors of production: the resources inputs that are available in an economy for the production of goods and services.

-Land: any natural resources
-Labour: people who are available to work
-Capital: something made in order to make something else
-Enterprise: the skill of combining the other factors of production

Production: the output of goods and services.

All resources are explained by the factors of production, which are invariably scarce. For example you want something, but you can't afford it because of your low income.This situation involves 3 economic concepts: scarse, choice and apportunity cost.

Want: anything you would like, irrespective of whether you have the resources to purchase it.
Scarcity: a situation where there are insufficient resources to meet all wants.
Choise: the selection of appropriate alternatives.
Opportunity Cost: the cost of the next best alternative foregone.

From the begining.Economics.

Economics : the study of how to allocate scarse resources in the most effective way.
For example- some people are rich to buy everything they want, but some people are not, so they have to choose what they need and what they can afford themselves to buy. The main thing in economics is CHOICE.

Economic problem: how to allocate scarce resources among alternative uses.
Not only individuals can face this problem, but also firms have to decide what to produce and how to produce in the most efficient way.

So there are 2 traditional fields of economics: mircoeconomics and macroeconomics.
Microeconomics: the study of how households and firms make dicisions in markets.
(Household:group of people whose spending dicisions are connected.)
Macroeconomics: the study of issues that effect economies as a whole.

Credit Cards

A credit card is part of a system of payments named after the small plastic card issued to users of the system. It is a card entitling its holder to buy goods and services based on the holder's promise to pay for these goods and services.The issuer of the card grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.

A credit card is different from a charge card, where a charge card requires the balance to be paid in full each month. In contrast, credit cards allow the consumers to 'revolve' their balance, at the cost of having interest charged. Most credit cards are issued by local banks or credit unions.

Advantages

A credit card can:

1. Offer free use of funds, provided you always pay your balance in full, on time.
2. Be more convenient to carry than cash.
3. Help you establish a good credit history.
4. Provide a convenient payment method for purchases made on the Internet and over the telephone.


Disadvantages

On the other hand, credit cards can:

1. Damage your credit rating if your payments are late;
2. Allow you to build up more debt than you can handle;
3. Have complicated terms and conditions;


What about me, i opened the bank account in Russia before i went to England and put some money there. There are some functions ,to controle your money, for everybody's taste. For example, when you buy something, you get SMS-message immediately or you can check on-line how much money did you spend(Internet Banking). So, when i have opened account i didn't choose SMS-notifier, because it is very expensive to recieve SMS abroad, especially when it is Russian Sim-Card. But my problem is that i forgot about On-line Bank. I was sure that i still have money on my account, but i was wrong. And when i came to the shop to buy some food, shop seller told me that my credit card declined. Now i have no money on my credit card and i have to solve many problems because of it.


What do i have to do?
Is it worth to open bank account in Englang and put money here?
How to control spending money by myself?

Externality

Externality: an effect whereby those not directly involved in taking a decision are affected by the actions of others.

Positive externality: exists when an individual or firm making a decision does not receive the full benefit of the decision.
http://economics.fundamentalfinance.com/positive-externality.php

Negative externality: occurs when an individual or firm making a decision does not have to pay the full cost of the decision.
http://economics.fundamentalfinance.com/negative-externality.php

Social cost= Private + External cost
MSC(Marginal Social Cost)= MPC(Marginal Private Cost)+ MEC(Marginal External Cost)
MSC=MPB(Marginal Private Benefit)= Social Optimum

External Benefit= good for you
External Cost= bad for you