Econ Unit 1

Scarcity

There only exists a finite amount of stuff, limited and costly

Opportunity cost

Profit lost when choosing something over something else

Demand induced

Too much demand

Supply induced

Not enough stuff

Structural induced

Not enough land

Commodity money

Values lies in use and tradable value (wheat, gold, etc)

Mintage

Stamped coins, universal, traded for commodities

Value of a coin

Precious metal and face value from the mint

Seigniorage

Difference between the face value and actual value

Gresham’s law

In a system with good and bad money, bad money will dominate because people want to hoard good money and spend bad money

Paper money

Least intrinsic value

Bimetallism

Fixed exchange rates of gold to other less precious metals, allowed for smaller trades, safer

Debasement

Gold coins getting clipped and becoming debased

Gresham’s law today

Our coins have little value, we have coins with high face value, we often use small bills

Bank of Canada

Responsible for printing our paper money and setting interest rates

Fiat currency

Issued by government central banks, not backed by gold, no intrinsic value

The Eurozone

Most used currency in the world

World currencies

Larger countries have the most currency in circulation

Resource specialization

Specializing to create different resources

Trade networks

A place to trade goods

Trading infrastructure

Ancient romans used ships, fur traders used canoes, royal road started silk road

Standards, laws, and regulations

Ports to collect duties, regulate trade

Mediums of trade

Gold, commodities, agreements

Pax romana

Roman empire build a massive trade network

Infrastructure

Trade routes began developing

The silk road

Silk was in high demand from china, china wanted glassware, spices

Silk road unpopular

Many places banned trade, people stole ideas

Silk road misconceptions

Only silk, trade made nations wealthy, whole road travelled

Mercantilism

Import and export controlled, most gold = most power

Venice mercantilism

Strong military, venice surrounded by water, ducat was strong

Banking and bookkeeping

Taxes and debt

Double entry

Allowed loans to be made

The age of discovery

Renaissance started because of wealth, competition to dominate

Portugal

Africa had lots of gold and trading ports started

Spanish empire

Spain and portugal colonized africa

Early colonization

Columbus convinced crown of benefits, indigenous people oppressed

Chinese trade

China banned foreign trade

Philip II

His reign brought back a lot of gold and silver

Spanish empire economy

They thought that gold was everything and mined so much that it caused inflation

England v.s spain

England sent people to steal spanish treasure

Habsburg wars

Spain was very involved and needed loans

English empire

Colonized north american and only britain could tade with them

Mercantilism

Export as much as possible, import as little as possible, colonies serve the mother country

Triangular trade

Slaves to NA, raw materials to england, textiles to Africa

Dutch dominance

Mastered trade and got very rich

What to do with money

Only improve mother country, build estates

Colbertism

The start of workshops becoming facories

War

Colonies v.s mother country

The seven years war

Frances loses a lot of colonies

Enlightenment

Discussing how to make things better after war, mercantilism was a problem

Physiocracy

Wealth is in agriculture and land development, landowners created wealth, merchants sterile

Individualism

Doing stuff for yourself, tax on land not transactions

Laissez Faire

Against mercantilism and government intervention

Natural laws of the market

Humans always act in self interest, competition, and supply and demand

American revolution

Boston tea party, liberty trees, against mercantilism and economic damage

French taxation

France didn’t have enough money so they started to tax the rich, but mostly taxed the poor

Climate and technology

Cold months led to better technology