Romania Clasa a XI-a Economics

Chapters: 4

1. The consumer

Needs, resources and demand

Introduction to Microeconomics and the Production Possibility Frontier – Microeconomics studies single units like one buyer or one firm; macroeconomics studies the whole economy. Resources are scarce and have other uses, so every economy must decide what, how and for whom to produce. The production possibility frontier (PPF) shows the best mixes of two goods an economy can make with all its resources used fully. Moving along it has an opportunity cost, which usually rises, so the PPF is concave.

Property and supply · Production

Producer's Equilibrium and Supply – A producer is in equilibrium when profit is the highest and there is no reason to change output. By the MR–MC approach two conditions must hold: MR = MC, and MC must be rising (MC cuts MR from below). Supply is the quantity firms are willing and able to sell at each price. Market supply adds all firms' supply. Supply depends on own price, input prices, technology, taxes, prices of other goods, number of firms and expectations. Own price moves us along the curve; other factors shift it. Es = % change in quantity supplied ÷ % change in price.
Production Function: TP, AP, MP and Returns to a Factor – A production function shows the maximum output a firm can get from given inputs: q = f(L, K). In the short run some inputs are fixed, so output changes only by changing the variable input. TP is total output, MP is the extra output from one more unit of the input, and AP is output per unit. As more labour works on fixed land, MP first rises, then falls, and finally becomes negative: the law of variable proportions (returns to a factor).

Price mechanism · Forms of market · Macro topics (2 h)

Perfect Competition and Price Determination – In perfect competition, very many firms sell the same product to very many buyers, so each firm is a price taker. The market price is set where market demand equals market supply (Qd = Qs). If demand rises, price and quantity both rise; if supply rises, price falls and quantity rises.
Markets: Meaning, Types and Forms – A market is any arrangement where buyers and sellers meet to swap goods, services or assets for money. It may be a street bazaar, a website or a phone call. Price is set by the pull of demand and the push of supply. Markets are grouped by place, time, size of deal, level of competition and by what is traded: goods, labour, money, capital and foreign exchange. Together, trade between countries forms the world market.
The Business Cycle: Booms, Recessions and How Policy Helps – Real GDP grows along a long-run trend, but in the short run it swings above and below it. These swings are the business cycle: expansion, peak (boom), contraction and trough (recession). Booms bring low unemployment and rising inflation; recessions bring job losses and low inflation. Governments use fiscal policy and central banks use monetary policy to make the swings smaller.

Economic integration

The European Union – The European Union (EU) is a group of 27 European countries that share some decisions and laws. It began in 1951, when six countries pooled coal and steel to make war between them impossible. It grew step by step into a single market where goods, people, services and money move freely. The Commission proposes laws, the Parliament and the Council pass them, and the Court of Justice makes sure they are applied. 21 members share the euro. The United Kingdom left in 2020.