Subprime Loan Mortgage A type of loan that is offered at a rate above prime

to individuals who do not qualify for prime rate loans.

Quite often, subprime borrowers are often turned away from traditional lenders because of their low credit ratings or other factors that suggest that they have a reasonable chance of defaulting on the debt repayment.

Subprime loans tend to have a higher interest rate and a variable rate than the prime rate offered on traditional loans. The additional percentage points of interest often translate to tens of thousands of dollars worth of additional interest payments over the life of a longer term loan.

Subprime Crisis: The loans the banks gave to the people with bad

credit turned into securities. These securities were bundled and were being

traded in the market. They were given ratings and a value- but it was

based upon nothing. Once the market plummeted the banks turned to

the people for payment- the people could not make the payments because the variable interest has skyrocketed.

As a result the people lost their homes, banks lost their money and government was forced to intervene.

Wine (thousands of bottles)

Grain (thousands of bushels)

0 15

5 14

9 12

12 9

14 5

15 0

underutilized

efficientgrowth

Make sure you understand underutilization, and what the shifting of the curve left and right means for a nation.

Equilibrium = the point at which quantity demanded and quantity supplied are equal

International Discoveries/

Conflicts

Number of Suppliers in Market

Producer Expectations

Government Influence

Input Costs

Changes in Supply

So what causes a shift in the demand curve?

Changes in

Demand

Consumer Tastes

Population

Income Consumer Expectations

Prices of related goods

How do we calculate elasticity?

If elasticity is less than one then demand is inelastic.

If elasticity is above one then demand is elastic.

If elasticity is equal to then it is unitary elastic.

Percentage change in quantity demanded

Percentage change in price

•Elasticity =

Percentage change

Original number – New Number

Original number= 100 x

1. Calculate elasticity for each example.

a. Elasticity: Is the good elastic, inelastic or unitary elastic? Why?

b. Elasticity: Is the good elastic, inelastic or unitary elastic? Why?

c. Elasticity: Is the good elastic, inelastic or unitary elastic? Why?

Price Quantity Demanded

Initial New Initial New 60 43 240 100

Price Quantity Demanded

Initial New Initial New 90 85 30 28

Price Quantity Demanded

Initial New Initial New 95 85 80 70