Econ Exam 1

When and where is Econ lab?

Monday: 10 and 2, Tuesday: 2
Sudro 26

How many points are possible in the course?

600 (1 final, 3 tests, 20 clicker days)

Are there any makeups?

Clickers: 4 possible, during last class
Tests: 1 possible, Dec. 9th at 8:30

When and where are office hours?

Barry Hall 404, Monday/Tuesday 3-4

How a society produces, exchanges, and consumes goods and services in the face of economic scarcity

Economics

2 types of scarcity

Absolute scarcity, Economic scarcity

What we think of when we hear "scarcity", running out of something

Absolute Scarcity

The concept that society has infinite wants and desires, we will never have enough/ everything we want

Economic Scarcity

Humanity is ______ (shown by economic scarcity)

insatiable

What's a question that economics seeks to answer due to economic scarcity?

What should we satisfy since we can't do it all?

Satisfies peoples wants and desires

Commodities

2 types of commodities

Goods and Services

tangible items, something that you can touch

Goods

intangible items

Services

Making goods and services

Production

Using goods and services

Consumption

4 types of Resources

Labor, Land, Capital, Entrepreneurship

All human effort that goes into production (workers)

Labor

All natural resources used for production

Land

All physical things used for production (machinery, plants, equipment)

Capital

Innovators and Risk takers

Entrepreneurship

What are the earnings for each resource?

Labor- wages
Land- rent
Capital- interest
Entrepreneurship- profits

2 Types of Profits

Normal Profits and Excess Profits

Need to be earned just to stay in business

Normal Profits

Profits earned that are above normal profits

Excess Profits

3 Economic Agents

Households, Firms, Government

2 functions of a Household

1. Consume/ purchase goods and services
2. Provide resources/ labor

2 functions of a Firm

1. Provide goods/services
2. Purchase resources

Context in which the voluntary exchange between a buyer and a seller of a good/service takes place

Market

4 Economic Issues/Goals

Efficiency, Equity, Stability, Economic Growth

Making the best possible use of resources when trying to achieve something

Efficiency

2 Types of Efficiency

Technical and Allocative

The efficient use of resources when producing goods/services

Technical Efficiency

The efficient allocation of societies scarce resources

Allocative Efficiency

4 basic/general questions for everyday economy

1. What are we going to produce?
2. How are we going to produce it?
3. How much are we going to produce?
4. Who are we producing for?

2 mechanisms to determine resource distributions

Competitive Markets and Prices

What's an example of how resource distribution is determined?

People need toilet paper, so they put their money towards it. Companies see that they can make money off of toilet paper, so they make more which heightens competition and lowers prices. The consumers then get what they want at affordable prices.

A signal sent to producers every time you spend money on something

Dollar Vote

Refers to the way society's output is distributed (distribution of income)

Equity

Payment from the government to a household in which the household does no corresponding work (food stamps, welfare)

Transfer Payment

The poorest _____ percent initially earn roughly _____ percent of income. After transfers, they earn roughly ____ percent.

20
1
5

What are the kinds of stability that economics is concerned with?

Price (inflation/recession), Employment (unemployment rate)

Refers to substantial and sustained increase in the nation's income or output

Economic Growth

Study of determination of economic aggregates such as total employment, total output, and the price level

Macroeconomics

Which two issues concern Macroeconomics?

Stability and Growth

Study of the efficient allocation of relatively scarce resources and the distribution of income

Microeconomics

Which two issues concern Microeconomics?

Efficiency and Equity

2 functions of a theory

1. Explains real world observations and consumer behavior
2. Tries to predict

Ignoring many details to focus on the most important elements of a problem

Abstraction

Value of the benefit of the best alternative when a choice is made, encourages thought about potential opportunities

Opportunity Cost

A statement that states what "is", deals with fact and explanation

Positive Statement

A statement that involves a value judgement, deals with opinion

Normative Statement

Variable that changes on its own (cause)

Independent

Variable that changes in response to the cause (effect)

Dependent

What is one exception to the Independent Variable= X Axis and Dependent Variable= Y Axis rule?

Supply and Demand

The change in the dependent variable when the independent variable changes by one unit

Slope

The value of the dependent variable when the independent variable equals zero

Vertical Intercept

Shows the maximum alternative combinations of 2 goods that an economy can produce at a given time, with a given stock of resources, a given level of technology, and fully employed resources

Production Possibility Curve (PPC)