ECON 1000: Exam 1 (Ch 1, 2, 3)
Economics is
the social science that studies decision making in the face of scarcity and the resulting impact of such decisions on both society as a whole and on the individual members therein
economics
the social science that studies how people make decisions in the face of SCARCITY and the resulting impact of such decisions on both society as a whole and the individual members therein. Finite Resources Most efficient way to apply limited resources (money, labor) Enterprise: What makes $ change? Willingness of buyer and seller ex. 1 pen, 1 suppler with only 100 pens; $20 choices to spend on food or clothes
microeconomics
the study of how individual decision maker behave and interact with each other, often with a focus on how households and firms behave and interact with each other in markets. 1 company/individual
In regards to a Production Possibilities Frontier, which of the following statements is true?
"A combination of goods is Unattainable if it cannot possibly be produced with the currently available resources and technology."
Which of the following combinations of output is "feasible but characterized by productive inefficiency"?
"A" (150 Tanks and 375 bushels of Corn).
Which of the following combinations of output is "attainable/feasible and characterized by productive efficiency"?
"B" (630 units of wheat and 1,600 computers).
Which of the following is one of the "Three Basic Economic Questions" that every society must address?
"Which productive resources should be used for the production of which goods?"
Which of the following is one of the "Three Basic Economic Questions" that every society must address?
"Who gets to consume the goods and services that we have chosen to produce?"
In this market there would be _______________________ at a price of $22
"excess supply"
Decision Making
a. Capitalism - Self Interested Decision Makers motivated by profit b. Socialism - Decisions made by the State assuming that State knows more than Free market
Total Output
a. Capitalism - Total Economy grows, innovation spurs economic growth b. Socialism - Redistribution of existing resources but little innovation
When considering potential government policies, it is important to recognize that
if a policy alters the costs and/or benefits for a decision maker, then the decision maker might change his behavior as a result of the policy
The Incentive Principle states that
if the marginal benefit of an activity increases, then a rational person will engage in more of the activity
goods and services
outputs of the production process, such as food, clothing, shelter, healthcare, education, and entertainment Material/stuff (factory) & locksmith
consumer sovereignty
the freedom for an individual to choose to purchase (or to not purchase) a good or services at a price determined in a free, unfettered market Buy whatever you want at price you want
total benefits
the gains that a person realizes from taking an action. SALES
firms
the institutions which transform factors of production into finished goods/services Companies
households
the most fundamental part of any economic system; ultimate consumers of most finished goods/services; primary suppliers of labor Change with time ex color tv
The Preliminary Circular Flow Diagram illustrates
the movement of economic resources (i.e., factors of production and finished goods/services) between households and firms
production
the process by which inputs (i.e., factors of production) are transformed into an output (i.e., a good or service) Raw materials to sell
Production refers to
the process by which inputs are transformed into outputs.
tradeoffs
the recognition that in many situations acquiring more of one thing can often only be done at the expense of getting by with less of something else.expense of getting by with less of something else. ex get return on money and labor Best chance of success
right to restitution
the right to be COMPENSATED by another person when he damages your property or infringe upon your rights. ex car accident contract- way to get enforced $ universal way to pain and damage
right to control
the right to decide how to use your property. ex land soy, corn, sunflowers
right to transfer
the right to obtain ownership of property from or relinquish ownership of property to another person. ex want to sell state tax, dies who passed generations
economic system
the rules and methods put in place by a society to answer the three fundamental economic questions of "What to produce?," "How to produce it?," and "For whom to produce it?" What's role of Gov? warden, caretaker, free roamer
human capital
the skills, education, and training which individuals in the labor force possess People and training
Which of the following is an example of a "Natural Asset"?
The 1.7 trillion tons of coal reserves in the United States
Property Rights
a. Capitalism - Individuals own most b. Socialism - Discouraged
Focusing on the "450th unit," the Buyer's Reservation Price for this unit is _____ and the Seller's Reservation Price for this unit is ____
$16; $25
If iced coffee costs $2.79 per cup, then Brandon should consume ____ cups per week.
$5
Brandon's Marginal Benefit of consuming a 2nd cup of ice coffee would be _______.
$6
3 dimensions of Private Ownership of Property: [capitalism]
(i) "right to control," (ii) "right to transfer," and (iii) "right to restitution.
Economic Freedom World How hard to start a business in that country Countiry with more government restriction have harder time starting a business
1 Hong Kong 2 Singapore 16 USA 39 South Korea 99 Russia 111 China 114 India 118 Brazil 156 Republic of Rongo 157 Venezuela
Adam Smith
18th century (1721‐1790) Scottish economist, who wrote "An Inquiry into the Nature and Causes of the Wealth of Nations," in which he laid out the central arguments for why private ownership/control of resources and trade in free markets often result in desirable outcomes
Karl Marx Factory: have profits, give profits to workers
19th century (1818‐1883) German philosopher, economist, and revolutionary, who wrote "Das Kapital" (1867, 1884, 1885) and co‐wrote (with Friedrich Engels) "The Communist Manifesto" (1848)
In equilibrium, ________ units would be traded each at a price of ________
375; $20.
If iced coffee costs $2.25 per cup, then if Ann wants to maximize her economic surplus, she should consume ____ cups per week
6
_______________ specifies what different parties must do, whatever the external circumstances, and provides for enforcement or compensation for nonperformance
A Contract
Roles of Government in Mixed Economy Countries that Appear to be Capitalist
A) Influencing Behavior through Tax Code - Deductions for Mortgages, Oil and Gas Credits Charity B) Providing Social Safety Net for Low Income people or others with Special Needs Food stamps, Medicare C) Redistribution Income - Progressive Taxation Higher tax people who make more D) Regulating business Behavior - Auto Regulations, Federal Trade Commission
Which of the following countries currently has an economic system which would be best described as "Pure Socialism"?
A. Poland. B. China. C. Israel. D. None of the above answers are correct.
In a free market economy, households
A. are the ultimate consumers of most finished goods/services. B. are the primary suppliers of labor to firms. C. Both A and B
Amy and Bill spend their days producing coffee and paper. In a single day Amy can produce either 10 units of coffee or 40 units of paper, while Bill can produce either 20 units of coffee or 30 units of paper. Based upon this information, it follows that
Bill has both the absolute advantage and comparative advantage in coffee production
Ownership
a. Capitalism - Means of Production owned by individuals b. Socialism - Means of Production owned by state
________________ is an economic system in which the means of production are privately owned and operated for a profit.
Capitalism
_______________ traces its philosophical roots to the work of 19th Century Philosopher Karl Marx.
Communism
_________________ is the subfield of economics that compares and contrasts the structure and performance of different types of economic organization
Comparative Economic Systems
____________ refers to the freedom of an individual to choose to purchase (or to choose to not purchase) a good or service at a price determined in a free market.
Consumer Sovereignty
An economic system "where the state uses influence, subsidies, grants, [and] taxes [to influence economic decisions], but does not compel, is referred to as:
Indicative Planning
The equilibrium in the model of supply and demand is
More than one (perhaps all) of the above answers is correct
Consider a society consisting of only three people: Andy, Bill, and Carrie. Andy and Bill spend all day producing clothing and food. At the end of each day they bring their output to Carrie, who then divides it between the three individuals. The "basic economic question" that Carrie is answering for this society is the
Distributional Decision
Which of the following is a basic characteristic of Capitalism?
Economic decisions occur in markets.
Ed and Fred produce Raincoats and Shirts. In a single day, Ed can produce either 60 Raincoats or 20 Shirts. Based upon this information alone, we know that
Ed's Opportunity Cost for producing a Shirt is "3 Raincoats."
Which of the following statements is a "Positive Statement"?
Elvis Presley died on August 16, 1977.
______________ is/are broadly defined as a decision-making institution with the legal authority to impose restrictions or mandates on the behavior of other decision makers
Government
____________ are the decision making entities whose primary objective is to obtain benefits from consuming goods and services
Households
_________________ refers to the skills, education, and training which individuals in the labor force possess.
Human Capital
During the last few decades in the United States, health officials have argued that eating too much beef might be harmful to human health. As a result, there has been a significant decrease in the amount of beef produced. Which of the following best explains the decrease in production?
Individual consumers, concerned about their own health, decreased their demand for beef, which lowered the equilibrium price of beef, making it less attractive to produce.
A.C. and Zack produce surfboards and hair gel. A.C.'s opportunity cost of producing a surfboard is lower than Zack's opportunity cost of producing a surfboard. The _________________ suggests that they can increase their total output of these two goods if A.C. focuses his production on surfboards while Zack focuses his production on hair gel
Law of Comparative Advantage
The ____________ provides a guide for allocating scarce productive resources to various tasks, which states that when increasing the production of a good, a society should do so by using the available productive resource with the lowest opportunity cost
Law of Comparative Advantage
The ____________ provides a guide for allocating scarce productive resources to various tasks, which states that when increasing the production of a good, a society should do so by using the available productive resource with the lowest opportunity cost
Law of Comparative Advantage
Preliminary Circular Flow Diagram
Live -> work -> buy Firm not give you enough $, people cannot buy Society benefits if this relationship works
________________ first said "From each according to his ability, to each according to his need."
Louis Blanc
____________ is the branch of economics which studies how individual decision-makers behave and interact with each other, often with a focus on how households and firms behave and interact with each other in markets.
Microeconomics
Mike and Xavier spend each workday assembling bicycles and fixing computers. Mike can assemble 20 bicycles in a single day, while Xavier can assemble 15 bicycles in a single day. Based upon this information alone, we know that
Mike possesses an Absolute Advantage in assembling bicycles
In 2015 High School graduates earned $11,037 per year more than non-high school graduates. If this difference had instead been $8,500 per year, then we would expect
More people would drop out of high school before graduating.
A ____________ statement aims to assess the desirability of how the world functions, perhaps with suggestions of things that could be done to improve matters
Normative
___________________ is a general concept that refers to the cost of giving up the best alternative that must be foregone in order to do or acquire something.
Opportunity Cost
Based upon the discussion in lecture, along the continuum illustrated above the economy of the United States currently would most accurately lie at __________.
Point B (between Norway and UK)
Tom Garr Quotes
Profit = economic surplus Measure Man's ability to meet his payroll Nature of man to always do better [don't want to be told what to do] Doing something gets better--> keep doing it (Incentive Principle) Charles Goodyear -Vulcanization (rubber to hard form) Think about other side -Impact I took had was less pain for that alternative, on the right track Efficiency or Fairness Car dealership: service drives sales Sales: most important is the 2nd time product is bought Doctors win 86% of restitution lawsuits Evolution Mom&Pop stores-> Walmart-> Amazon
Total Benefits (i.e., Total Benefits, not Total Economic Surplus) are maximized at
Q5
Marx believed that Most Improvements in Productivity arising from the new Factory System should accrue to workers who produced the goods not the factory owners who owned the factories.
Rejected Private Property Rights Government Makes All Decisions about how to Allocate Resources Value of All Labor is the Same
Recall the results of the "Ease of Doing Business" study discussed in lecture and summarized on page 60 of the textbook. According to this study, of the 189 countries examined, the country with the lowest costs of conducting business (i.e., the country ranked at "the top" of this list) is
Singapore
Invisible Hand
Smith's recognition that under certain conditions, the behavior of self‐interested decision makers interacting in free markets leads to outcomes which are better for all parties. -when the "invisible hand" is applicable, any possible alternative to the market outcome would be less desirable for some individuals in society. -"free market forces" are the "invisible hand" that leads us to an outcome that is "efficient" (in that "total social surplus" is maximized). Willingness & buying seller Underlining force (rises $ to own level), Most efficient will rise to top Market tells you less favorable (demand or if price is right) People act in self-interest, risk will optimize
Marginal
The next one
If the decision maker increased the amount which she was engaging in the activity from Q3 to Q4 , then
Total Costs, Total Benefits, and Total Economic Surplus would all increase.
In which of the following countries do individuals enjoy the least amount of Economic Freedom?
Venezuela
The present economic system of the United Kingdom would be most accurately described as ______________________, while the present economic system of Spain ______________________.
a Mixed Economy; would also be most accurately described as a Mixed Economy
The present economic system of the United Kingdom would be most accurately described as ______________________, while the present economic system of Spain ______________________.
a Mixed Economy; would also be most accurately described as a Mixed Economy.
attainable output combination
a combination of goods that can possibly be produced by a society with its available productive resources and technology
unattainable output combination
a combination of goods that cannot possibly be produced by a society with its available productive resources and technology (such combinations are beyond the PPF).
production possibilities frontier
a curve that summarizes the limits of production that a society faces by illustrating the maximum amount of one good that can be produced for every possible level of production of another good. FULL CAPACITY Can't make anymore
government
a decision‐making institution with the legal authority to impose restrictions [interferes] or mandates on the behavior of other decision‐makers (i.e., the ability to use legal coercion).
opportunity cost
a general concept that refers to the cost of giving up the best alternative that must be foregone in order to do or acquire something; it measures the value of the next best use of the resources used to undertake (and provides the truest measure of the cost of engaging in) the activity being considered. Cost you gave up, the alternative ex pick up or nice interior
Law of Comparative Advantage
a guide for allocating SCARCE productive resources to various tasks, which states that when increasing the production of a good, a society should do so by using the available productive resource with the lowest opportunity cost (applying this rule allows a society to achieve productive efficiency).
Cost‐Benefit Principle
a guide to decision‐making which states that an individual should undertake an activity if and only if the additional benefit of doing so is greater than or equal to the additional cost of doing so. More positive outcome
contract
a legal document which specifies what different parties must do, whatever the external circumstances, and provides enforcement or compensation for non‐performance
Tucker recently spent $400 on at the KSU bookstore on textbooks for his fall semester classes. He was able to use the money to acquire these books since money serves as
a medium of exchange
New Soviet Man
a person motivated primarily by selfless benevolence.
The Cost-Benefit Principle states that
a person should take an action if and only if the additional benefit of doing so is greater than or equal to the additional cost of doing so.
Economic Man (or homo economicus)
a person who is both self‐interested and rational (this is the standard assumption within mainstream economics)
comparative advantage
a producer has a comparative advantage in the production of a good if her opportunity cost of producing the good is lower than the opportunity cost of another worker for producing the same good. Take choice cost you didn't take is lower
absolute advantage
a producer has an absolute advantage in the production of a good if she can produce more output than another producer using the same amount of inputs. ex 6 vs 7, 7 is more
productive efficiency
a situation in which it is NOT possible to increase the amount produced of any good, without decreasing the amount produced of some other good (in such cases the society will be producing a combination of outputs on its PPF) Make as much as you can FULL CAPACITY
productive inefficiency
a situation in which it is possible to increase the amount produced of some good, without decreasing the amount produced of any other good (in such cases the society will be producing a combination of outputs below its PPF). Not at Capacity You can do more
normative statement
a statement that aims to assess the desirability of how the world is or functions, perhaps with suggestions of things that could be done to improve matters. PREDICTION say what you think will happen ex KSU football will have a good season
positive statement
a statement that aims to describe how the world actually is or actually functions. FACT ex. julio jones caught 6 passes
Incentive Principle
a summary of how behavior of a rational decision maker will change as costs or benefits change: (i) if the marginal benefit of an activity increases, then a rational person will engage in more of the activity,whereas (ii) if the marginal cost of an activity increases, then a rational person will engage in less of the activity. Benefit do it Cost will not Gov creates tax structure: better for society; penalties: not to do certain action Might backfire and create another behavior (unintended consequences) *Doesn't mean it will happen ex Lawsuits on smoking/cancer- big taxes on cigarettes' cut back on smoking
scarcity
a universal phenomenon that arises because resources are limited. Maximize profit=economic surplus Change in prices influence decisions ex: locksmiths
Government Planning
a. Capitalism - Indicative Planning - an environment in which the government guides the behavior of individuals in regards to economic decisions by establishing policies which alter costs and benefits. b. Socialism - Command Planning - an environment in which the government directly controls nearly all economic activity, with almost all production taking place within enterprises owned and operated by the state.
Purchasing Decisions
a. Capitalism - consumer sovereignty - the freedom for an individual to choose to purchase (or to not purchase) a good or services at a price determined in a free, unfettered market. Free Market Determines Price which allocates resources b. Socialism - Rationing - Forced equality in turn leads to shortages Rationing- no rewards for risk
Economic Incentives
a. Material Rewards - monetary rewards or direct increases in consumption from engaging in an activity. Primarily in Capitalism b. Moral Suasion - attempts to convince individuals to behave in a certain manner because doing so is the right thing to do. Mostly in Capitalism but sometimes justified in more Collective economies. c. Coercion - the use or threat of force or incarceration in order to obtain compliance. More common in Socialism.
Consider the following two statements. Statement A: "Tariffs and import quotas usually reduce the general welfare of society." Statement B: "A minimum wage decreases unemployment, particularly among highly skilled workers." Most economists would
agree with Statement A, but disagree with Statement B
Efficient
an attainable combination for which it is not possible to increase the production of any good without decreasing the production of some other good. Resources allocated, society benefits
Inefficient
an attainable combination for which it is possible to increase the production of one good without decreasing the production of any other good
mixed economy - Countries in Transition from Socialism to Capitalism - Eastern Europe, Middle East - Countries in Relapse back to Socialism - Venezuela (OIL), Iran
an economic system in which most factors of production are owned and controlled by individuals, while some factors of production are owned and controlled by the state (i.e., a system which contains some elements of capitalism and some elements of socialism).
command planning
an environment in which the government directly controls nearly all economic activity, and almost all production takes place within enterprises owned/controlled by the government.
indicative planning
an environment in which the government guides the behavior of individuals in regards to economic decisions by establishing policies which alter costs and benefits.
Between June 2017 and September 2017 there was a decrease in equilibrium price and increase in equilibrium quantity traded in the market for "good y." This change in the market equilibrium outcome would result from
an increase in Supply
Normative Statements
are supported (either implicitly or explicitly) by the priorities, goals, and value judgments of the person making the statement.
One of the three primary types of "economic incentives" is "moral suasion," which could be described as
attempts to convince individuals to behave in a certain manner because doing so is "the right thing to do."
moral suasion Economic Incentives Mostly in Capitalism but sometimes justified in more Collective economies
attempts to convince individuals to behave in a certain manner because doing so is the right thing to do.
Starting at Point B (i.e., 630 units of wheat and 1,600 computers), if this society wanted to produce 150 more units of wheat then the maximum amount of computers they could produce would
be less than 1,600 computers but greater than 1,000 computers
The term Economic Man means that man is
both rational and self-interested
In the writings of Karl Marx, the "bourgeoisie" referred to the _______________ and the "proletariat" referred to the _______________.
business owners; working class
total economic surplus
the difference between total benefits and total costs. TB - TC Sales - Burdens Gains - Cost
A "Self-Interested" person
cares about his own well-being more than the well-being of others.
Attainable
combination of goods that can possibly be produced with the currently available resources and technology.
Unattainable
combination of goods that cannot possibly be produced with the currently available resources and technology.
It appears as if Ann has a ____________ for iced coffee consumption
diminishing marginal benefit
Communism State controls everything
economic system in which the means of production are collectively owned by all people in a society (without intervention by a government or state). A stateless, classless economic system in which all the factors of production are owned by the workers and people share in production according to their needs: "From each according to his ability, to each according to his need" (Louis Blanc in "The Organization of Work," 1839)
SOCIALISM have to be powerful to become rich (guys at top do better) Only contribute value of labor, however all labor is the same - Communism - Command System [tell you what to do] - Centrally Planned System
economic system in which the means of production are owned by the government. Some private property Coheresion redistrubte resources
capitalism Have to be rich to be powerful person who took risk should get $ - Free Market System - Free Enterprise - Decentralized System (less restrictions) - Laissez Faire (leave you alone) - Ownership - Limited and Private
economic system in which the means of production are privately owned and operated for a profit. Free to make own decisions HAVE Choices
A ____________ is decision making entity whose primary economic role is to produce goods and services for consumption
firm
Michael recently travelled from Georgia to Nevada to attend the Floyd Mayweather Jr. vs. Conor McGregor boxing match in person. His Total Benefits from this trip were $17,500, while his Total Costs were $12,500. From this information, it follows that his Economic Surplus
from attending the fight was: $17,500 - $12,500 = $5,000
John runs the hot dog concession stand at a high school basketball game. His Total Benefits from selling hot dogs at the game were $120, while his Total Costs were $70. From this information, it follows that his Economic Surplus
from working at the game was ($120)-($70) = ($50).
The opportunity cost of producing an additional unit of wheat is
greater at Point C than at point B
For two individuals who engage in the same two productive activities, it is generally impossible for one of the two individuals to
have a Comparative Advantage in both activities
For two individuals who engage in the same two productive activities, it is generally impossible for one of the two individuals to
have a Comparative Advantage in both activities
factors of production
inputs in the production process, broadly categorized as land, labor, and capital INPUTS put up $, resources
In July 2012 professional golfer Adam Scott bogeyed the last four holes of the British Open to lose the tournament to Ernie Els by one stroke. Around the same time flooding in Beijing, China resulted in the death of at least 77 people. If Adam was more upset about the outcome of the British Open than about the loss of life from the flooding in Beijing, then it would seemingly suggest that he
is a self-interested individual.
Last week Roger Federer lost to Juan Martín del Potro in the quarterfinals of the U.S. Open tennis tournament. Around the same time hurricane Harvey killed 70 people. If Roger Federer is more upset about being eliminated from the U.S. Open than about the loss of life caused by the hurricane, it would seemingly suggest that he
is a self-interested individual.
Diminish Returns
less return to you when you do it and sell for 2nd or 3rd time around
Consider the costs of complying with bureaucratic regulations to economic decision makers in Singapore, Poland, and Venezuela. According to the results of the "Ease of Doing Business" study, of these three countries, such costs are:
lowest in Singapore and highest in Venezuela
"Voluntary Trade" generally
makes both parties to the trade better off.
material rewards Economic Incentives Primarily in Capitalism
monetary rewards or direct increases in consumption from engaging in an activity.
In 2015 High School graduates earned $11,037 per year more than non-High School graduates. If this difference had instead been $8,500 per year, then we would expect:
more people to drop out of school before graduating High School.
If this society wanted to produce 650 bushels of Corn, then their maximum output of Tanks would be
more than 210 but fewer than 300 Tanks
The Preliminary Circular Flow Diagram illustrates the
movement of economic resources (i.e., factors of production and finished goods/services) between households and firms
natural assets
natural resources, including minerals, naturally occurring vegetation, water resources, topographical features, and available agriculturally productive land oil
1) production decision
of all the different combinations of goods and services resource use decision 123 which productive resources will be used to produce which goods and services? WHAT to make? ex be locksmith; manufacture dog food
On September 4, 2009, California Governor Arnold Schwarzenegger offered a $100,000 reward for anyone who could provide information leading to the arrest and conviction of the arsonists who set a wildfire in southern California which claimed the lives of two firefighters. In this situation, Gov. Schwarzenegger was attempting to obtain the desired information by
offering a material incentive
Reggie Dunlop (coach/player of the Charlestown Chiefs ice hockey team) offered to pay $100 to any player on his own team that could injure opposing player Tim McCracken of the Syracuse Bulldogs during an upcoming game between the two teams. By offering this money, Coach Dunlop was trying to get his teammates to play more aggressively by
offering a material reward
Andrea has $75 to spend and wants to purchase either a new amplifier for her guitar or a new MP3 player. Each good costs exactly $75, so she can only purchase one of the two items. This scenario illustrates the basic concept that
people face tradeoffs.
The economy of the "former Soviet Union"
perhaps provides the best example of a large society with an economic system close to "pure socialism."
The economy of the former Soviet Union
perhaps provides the best example of a large society with an economic system close to "pure socialism."
Production Possibility Frontier (Also called Production Possibility Curve)
provides society with a "menu of available options," from which society chooses "one particular combination of goods" (the choice obviously depends upon preferences/priorities of society)
The quote on page 17 of the course textbook suggests that Milton Friedman believed that Mother Theresa was
rational and self-interested.
Negative rights
right not be interfered with but everyone else has the right too Left alone but you could be harming
While playing baseball in their front yard, Wally and his little brother break the windshield of Ward's car. Wally and his brother concede that it is right for them to cover the costs of repairing the broken windshield. In taking this position, they are recognizing that Ward has a ______________ in regards to his car windshield.
right to restitution
Robbie is a ventriloquist. In order to get money to buy tickets to a concert, Robbie decides to sell his ventriloquist puppet (named Rex) to his friend Andre for $350. When selling the puppet to Andre, Robbie is exercising a ____________ in regards to his puppet Rex.
right to transfe
self‐interested individual
someone who makes his own personal assessment of the benefits and costs associated Economic surplus/profit maximizes
rational decision maker
someone with a well‐defined goal, who takes actions to achieve the goal as best as possible. SELF INTEREST with available info & make rational well defined goal
A "Rational Decision Maker" should
take an action if and only if the Marginal Benefit of the action is at least as great as the Marginal Cost of the action
economic resources or factors of production
the INPUTS such as factories, farms, stores, trucks, and equipment used to produce goods and services.
Consider a good for which quantity demanded is 500 units at a price of $10 and (all other factors fixed) quantity demanded is 650 units at a price of $8. These observations begin to provide evidence that
the Law of Demand is satisfied for this good.
total costs
the burdens that a person incurs from taking an action. BURDENS
marginal benefit
the change in the value of total benefits as more of an activity is undertaken.
marginal cost
the change in the value of total costs as more of an activity is undertaken.
market
the collection of all potential buyers and all potential sellers of a {particular} good or service. $ move willing buyer and seller never static = can change
produced assets
the currently available machines, factories, and inventories of finished goods available as industrial capital, as well as social capital such as transportation and communications infrastructure, and educational institutions
householdss
the decision making entities whose primary objective is to obtain benefits from consuming goods and services YOU in home or family Buy as individuals Make $, buy stuff
firmss
the decision making entities whose primary role is to produce goods and services for consumption by household Comapines
macroeconomics
the study of the functioning and performance of a society's economy as a whole, often with a focus on levels of and changes in aggregate measures such as the inflation rate, unemployment rate, and gross domestic product growth rate Entire economi
comparative economic systems
the subfield of economics that compares and contrasts the structure and the performance of different types of economic organization (i.e., different economic systems). four primary economic institutions: households, firms, markets, and government Capitalism and Socialism 1 fails, another rises
Bourgeoisie
the term which Karl Marx used to refer to BUSINESS owners.
Proletariat
the term which Karl Marx used to refer to the WORKING class.
coercion Economic Incentives More common in Socialism
the use or threat of force or incarceration in order to obtain compliance.
Starting at Point "C" (i.e., 210 Tanks and 800 bushels of Corn), if this society wanted to produce 90 more Tanks, then
they would have to decrease their output of Corn by at least 300 units.
Three Fundamental Economic Questions
when it comes to deciding how to use scarce productive resources, every society must address three fundamental economic questions: (i) What to produce? (production decision), (ii) How to produce it? (resource use decision), and (iii) For whom to produce it? (distributional decision)
2) resource use decision
which productive resources will be used to produce which goods and services? HOW to make Raw materials determined Sell, minimize cost & maximize profit
3) distributional decision
who gets to consume the goods and services that we have chosen to produce? WHO's your market? Get people in market to buy as much as they can ex hotels (cater to crowds) resturants Chili's vs Longhorns
Paula enjoys going to the movies. In July she saw 8 movies in the theatre. Her Marginal Benefit of the 8th movie was $16, while her Marginal Cost of the 8th movie was $12. Based upon this information alone, her Economic Surplus
would have been smaller if she had instead gone to the movies 7 times.
