1. 12 basic principles
   1. Individual Choice
      1. 1.Resources are scarce
         1. there is not enough of it to satisfy all the various ways a society wants to use it
      2. 2.Opportunity Costs
         1. the value of the next best alternative that is given up to engage in an activity or exchange
         2. A,B are two options: A value is M, B value is N; OC of A = N, OC of B = M
         3. Example: 1.Free ticket of Clapton concert 2.$40 cost to Dylan concert, but willing to pay up to $50 OC of 1=$50-$40=$10
      3. Net Marginal Benefit Principle
         1. 3."How much?" A decision made at the margin
      4. The Invisible Hand Principle
         1. 4.People usually exploit opportunities to make themselves better off
   2. Interaction of Choices
      1. Trade
         1. 5.There are gains from trade
      2. Market
         1. 6.Markets move toward equilibrium
         2. 7.Resources should be used as efficiently as possible to achieve society's goals
            1. People have exploited all the available opportunities to make themselves better off
         3. 8.Markets usually lead to efficiency
      3. 9.When markets don't achieve efficiency, government intervention can improve society's welfare
   3. Interaction in the Economy
      1. 10.One person's spending is another person's income.
      2. 11.Overall spending sometimes gets out of line with the economy's productive capacity
         1. When economic times are slow, spending ↓ and businesses may see their stock pile of inventories ↑.
      3. 12.Government policies can change spending
2. Models in Economics
   1. Other things equal assumption: One part of the model is changed; all the other parts remain unchanged.
   2. The best way to grasp this point is to consider some simple but important economic models
      1. The production possibility frontier: a model that helps economists think about the trade-offs every economy faces
      2. Comparative advantage: a model that clarifies the principle of gains from trade—trade both between individuals and between countries
      3. Circular-flow diagram: a schematic representation that helps us understand how flows of money, goods, and services are channeled through the economy
3. Market
   1. Influenced by sellers and buyers
   2. Demand
      1. The determinants of Demand
         1. Price
         2. Price of related products
         3. Price of substitutes
         4. Income
         5. Preference
      2. The demand function、schedule、curve
         1. Qx=f(Px,Py,I,T)
         2. Change in price：Move along the curve
         3. Change in complementary：Py↑，Qx↓，Curve←
         4. Change in substitute：Py↑，Qx↑，Curve→
         5. Change in income：I↑，Ordinary Curve→，Inferior Curve←
   3. Supply
      1. The determinants of Supply
         1. Price
         2. Price of inputs
         3. Technology
      2. The supply function、schedule、curve
         1. Qx=f(Px,PriceInputs,Technology)
         2. Change in price：Move along the curve
         3. Change in price of inputs：Py↑，Cost↑，Curve←
         4. Change in technology：Cost↓，Curve→
         5. Change in income：I↑，Ordinary Curve→，Inferior Curve←
      3. Price is too high→Supply Surplus
      4. Price is too low→Supply Shortage
   4. Equilibrium
      1. Changes in Demand
         1. Price of related goods
         2. Consumer preference
      2. A Change in Supply
      3. Simultaneous Change
   5. Surplus Value
      1. Consumer Surplus
         1. Comsumer Surplus=Willingness to Pay(WTP)-Price(P)
         2. Demand Curve：the area between the demand curve and price is comsumer surplus
      2. Producer Surplus
         1. Producer Surplus=Willingness to Sell(WTS)-Price(P)
         2. Supply Curve：the area between price and the supply curve is producer surplus
      3. Total Surplus
         1. Total Surplus=Comsumer Surplus+Producer Surplus
         2. Model
            1. Q1>Q，Additional Cost=A(area between Q,Q1,supply curve and demand curve)+B(Additional Value=area between Q,Q1 and demand curve)
            2. Q2<Q，Total Surplus is decrease.
      4. Government Intervention
         1. Price Ceiling<Equilibrium，Demand↑，Supply↓
         2. Price Floor>Equilibrium，Demand↓，Supply↑
4. Elasticity
   1. Price Elasticity of Demand
      1. Price
         1. Price Elasticity=%ΔQx/%ΔPx
            1. │E│<1，Inelastic IF Px↑，Total Revenue ↑
            2. │E│>1，Elastic If Px↑，Total Revenue ↓
         2. Influencing Factor
            1. How many substitute Substitutes less，inelastic
            2. How expensive a good Higher price，higher elastic
      2. Income
         1. Income Elasticity=%ΔQx/%ΔI
         2. Normal goods（+）：%ΔI=-10%，-%ΔQx；%ΔI=+10%，+%ΔQx
         3. Inferior goods（-）：%ΔI=-10%，+%ΔQx；%ΔI=+10%，-%ΔQx
      3. Cross Price
         1. Cross Price=%ΔQx/%ΔPy
         2. x、y are complements（-）：%ΔPy=+10%，%Qx=-10%
         3. x、y are substitutes（+）：%ΔPy=+10%，%Qx=+10%
   2. Price Elasticity of Supply
      1. （+）Elasticity Supply=%ΔQx/%ΔPx
   3. Distribution Effects of Tax
      1. Tax imposed to buyers：Demand curve←
      2. Tax imposed to sellers：Supply curve←
      3. Tax is eventually on the more inelastic one
   4. Tax&Surplus
5. The Production Process
   1. The Production of Tennis Balls
      1. workers=Variable(input)
      2. Buckets=Fixed(input)
   2. Time Period
      1. Long-run：all inputs are variable
      2. Short-run：some inputs are fixed
   3. Marginal Product
      1. MPn=ΔQ/Δn
   4. Cost
      1. Variable Costs=Workers Costs=VC
      2. Fixed Costs=FC
      3. Total Costs=VC+FC
   5. Marginal Costs 边际成本
      1. MC=ΔTC/ΔQ
   6. Cost Curve
      1. Average Fixed Cost(AFC)=FC/Q
      2. Average Variable Cost(AVC)=VC/Q
      3. Average Total Cost(ATC)=AVC+AFC=TC/Q
6. Competitive Output
   1. The maximizing Profit Assumption
      1. Profits=Revenue-Costs，R=Revenue，TC=Costs，∏=Profits
      2. Economic Profit=Revenue-Accounting Cost-Opportunity Cost
      3. ∏=R-C, MR>MC, ∏↑; MR<MC, ∏↓
      4. Perfect Competition
         1. Price Takers
         2. 3 Conditions
            1. Contain many producers, none of whom have a large market share
            2. Consumers regard the products of all producers as equivalent, which implies that the good is a standardized product
            3. There is the free entry into, and exit from the market
   2. The Short-run Decision
      1. Close: Price<AVC
      2. Open
   3. Long-run Competitive Output
      1. Q=Product Quantity, q=Firm Quantity
      2. Profits=(P-ATC)q
      3. Equilibrium: MR=MC=P, TR=`P*Q
      4. The Long-run Supply Curve
         1. More companies, ATC is higher
         2. When companies are enough, new technology makes ATC lower
7. Firms with Market Power
   1. Market Structure
      1. Characteristic
         1. How many sellers?
         2. Is the product differentiated?
      2. Monopoly(One, Unique)
      3. Oligopoly(A few, Somewhat)
      4. Monopolistic competition(Many, Somewhat)
   2. Pricing with market power
      1. Sources of Market Power
         1. Resource
         2. Technology advantage
         3. Government
            1. Patent
         4. Product differentiation
      2. Market Revenue and the Price Elasticity of Demand
         1. More elastic a good is, the less I can markup the price
         2. More inelastic, the more I can actually charge you
      3. Price Discrimination
         1. Perfect Price Discrimination
            1. Selling to each customer at a different price amd maximizing the price that each customer is willing to pay
         2. Inperfect Price Discrimination
         3. Other Pricing Strategies
            1. Bundling
            2. A company actually to force you to buy things in packages
            3. Two-part Tariff
            4. The price of a product or service is composed of two parts: lump-sum fee, a per-unit charge
      4. The Social Cost
         1. Social Cost=QM-QPC
         2. Market Failue
            1. Monopoly case
            2. Public goods
            3. Externalities
8. Public Goods, Common Resources, and Externalities
   1. Different Types of Goods
      1. Excludable: Can we exclude people from consuming the good?
         1. Private Good
            1. Excludable, Rival
            2. A pair of pants
         2. Club Good
            1. Excludable, Nonrival
            2. Cable TV
      2. Rival: Does my consumption for this good affect anyone else's consumption for this good?
         1. Common Resource
            1. No Excludable, Rival
            2. Clean water
         2. Public Good
            1. No Excludable, Nonrival
            2. National Defense
   2. Public Good
      1. Free-ride
      2. Solve: Force everyone to pay
   3. Common Resource
      1. Tragedy of Common Resource: Overconsumed
      2. How to deal with it: Control the rights of using resources
   4. Externality
      1. Characteristic
         1. An agent engages in an activity which changes the welfare of another agents.
         2. The change in welfare goes uncompensated.
      2. Nagetive Externality
         1. Polution
         2. Pollution Cost of Electricity: Curve↑, Price↑, Quantity↓
      3. Positive Externality
      4. Private Solution
         1. Coase Theorem: maximize toal welfare for both sides
         2. Property right
      5. Government Solution
         1. Taxes
         2. Permits
         3. Standards