Econ Chapters 1 & 2

Scarce

• something finite

Utility

• satisfaction, not usefulness to the consumer

Rational behavior

• making choices that maximize personal satisfaction, utility, or profit based on available options and constraints

Marginal analysis

• measuring the marginal cost and benefit

Marginal benefit

• satisfaction or revenue gained from producing or consuming one more unit.

• benefit of nxt unit

Marginal Cost

• The extra expense incurred from producing or acquiring one more unit.

• cost of nxt unit

Economic Methodology

• Scientific method

  • hypothesis testing

  • theory

  • law principles

  • models

Centeris paribus

• other things equal

• test 1 var leave other things unchanged

Economic goals

• econ growth

• full employ (4 to 6%)

• econ efficiency

• balance of trade

• price lvl stability 9(~2% is good)

• equitable distribution

• econ secuirty

• econ freedom

Capital goods

• help produce other goods, machinery--ex: cash registers, trucks ,tractor

Consumer goods

• For ppl directly, TV, phone ect

Inc opp costs

• the goods are different

• bowed shape curve

Constant opp cost

• straight line/slope

• the products are similar

Outside the PPC and not on curve

• impossible

• due to fixed tech, labor and resources.

• can spend that much in resources

• can get their in the future if we expand

Inside the PPC curve and not on the line

• insufficient

  • higher unemployment

Equitable Distribution

• equitable income taxes, govt covert equal benefits/transit, healthcare and school.

Economic Security

• Social security, medicare, unemployment, welfare( after 2wks unemploy)

Balanced Trade

• equal amount of imports and exports

Positive economics

• Based on facts and evidence

Normative Economics

• Based on opinion

Foundation of Economics

• Unlimited wants but scarce productive resoruces

Economic Resources

• Land

• Capital

• Labor

• Entrepreneurial ability

Property resources

• Land

  • oil,water,minerals,gold,

• Capital

  • means of production ,invest in capital

    • investment-

      • real capital- tractors, cash reg

      • financial capital-stocks,bonds

Human Resoruces

• Labor

  • wages

• Entrepreneurial ability

  • take initiative

  • strategic business decisions

  • risk bearers

    • profit and loss

Full Employment

• unemployment rate at 4 to 6%

Full Production

• Producing everyday

Productive efficiency

• lowest cost to produce

Allocative efficiency

• producing goods ppl want

Production Possibilities

• full employment

• fixed resources

• fixed tech

• two goods

Market System- supply and demand

• private prop

• freedom of choice

• competition

• markets and prices- charging too low/high

• limited govt

Command System-govt make decisions

• central planning

• public ownership

• fixed pricing

• no competition

• assigned wages

• limited choice

• social equity focus