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Practical Guide To Contemporary Economics

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Yuri Yevdokimov

Practical Guide To Contemporary

Economics

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Practical Guide To Contemporary Economics

© 2012 Yuri Yevdokimov & bookboon.com

ISBN 978-87-403-0238-7

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Practical Guide To Contemporary Economics

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Contents

Contents

1 he Issues and Methods of Economics 10

1.1 Economics as a science 10

1.2 Modeling in economics 11

1.3 Economic way of thinking 13

1.4 Production possibilities frontier (PPF) 14

1.5 PPF and opportunity costs 16

1.6 Economic eiciency 17

1.7 Specialization, absolute and comparative advantage 18

2 Demand and Supply 21

2.1 Demand as a function 21

2.2 Individual demand versus market demand 24

2.3 Determinants of demand 25

2.4 Supply as a function 26

2.5 Individual supply and market supply 27

2.6 Determinants of supply 28

2.7 Market equilibrium 29

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Practical Guide To Contemporary Economics

5

Contents

2.8 Price elasticity of demand 31

2.9 Total revenue and price elasticity of demand 37

2.10 Price elasticity of supply 37

2.11 Other types of elasticity 38

3 Consumer Choice and Demand 40

3.1 Consumption and rationality 40

3.2 Budget constraint and budget line 40

3.4 Maximizing total utility 45

3.5 Deriving the demand curve 47

3.6 Consumer surplus 49

4 Production and Costs 51

4.1 A irm in economics 51

4.2 Accounting versus economic costs and proits 52

4.3 he short-run and long-run 55

4.4 Short-run production 55

4.5 Short-run costs 59

4.6 Simple algebra of the short-run costs 62

4.7 Long-run production and costs 64

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